The vast majority of fintech companies that have gone public since 2020 have lost money for investors who bought in at IPO, Renaissance Capital data shows.
Why it matters: Many fintech bulls pointed to the pandemic as a mega catalyst for the industry. Those who listened have not yet been rewarded for their optimism.
Why it matters 2.0: The slowdown isn't just hurting public market investors. Remember that large private investors are also increasingly boasting of their ability and desire to hold onto portfolio companies even past IPO.
Details: Just five of the 24 fintechs that went public via IPO since 2020 have managed to keep their investors above water, according to Renaissance Capital.
- And it gets uglier: Only Upstart, Shift4 and dLocal managed to beat the broader S&p 500 during the same period.
- The worst performers, meanwhile, have lost far more than the broader S&P 500 Index. Even from its highest point, the index has lost 13% at most, while the likes of Riskified, Robinhood and Remitly are down over 70% since their IPO dates.
Driving the news: "Broadly speaking there is much less of an appetite for unprofitable growth/tech stocks lately. Many names — including Coinbase, Robinhood, and Toast — are likely to face profitability concerns in 2022," Ryan Coyne, a senior associate with Mizuho, noted in an email.
- Upstart meanwhile has done relatively well because investors had lower expectations when it went public, Simon Clinch of Atlantic Equities says.
- "After going public in December 2020, the company significantly increased its revenue and profit expectations," he says.
- But: "Upstart hasn't been tested in a downturn yet," Clinch adds. And that is true for many of the tech companies that have gone public in the last two years.
Of note: The data above doesn't include insurtechs, which would easily take the dubious crown of "worst performing fintechs" if they were to be added to the set.
- According to Renaissance, the top five worst performers would all be insurtechs if these were included, with GoHealth (down 96% since its July 2020) and Root (down 94.9% since its October 2020 debut) leading the pack.
