AltFi Fintech Index falls 8.7%
February was a tougher month for financial technology stocks, with only a small fraction posting positive returns as macro concerns hit the share prices of high-growth companies.
Image source: Pixabay
A roaring start to the year for the AltFi Fintech Index in 2023 has been met by a tougher month in February.
During February, amid a dip in the decline in sentiment in January, the AltFi Fintech Index fell 8.7 percent for the month.
By comparison, the MSCI World Index, which tracks thousands of the largest global companies, fell 2.7 percent in February.
Asset management giant Amundi notes that global appetite for exchange-traded funds (ETFs) – a proxy for risk market sentiment – cooled in February. Despite ETFs seeing inflows of €14.9 billion, the month also represented the lowest allocation to ETFs since April 2022.
This, says Amundi, may well reflect investors’ concerns about the direction of interest rates.
“European investors added 6.8 billion euros while US investors allocated 6.1 billion euros, breaking the long-term trend of the North American market typically being several times larger than the European one,” Amundi said.
In February, almost all of the index’s share prices came under pressure with Open Door Technologies the worst performer with a fall of 40 percent.
Open Door is a digital platform for residential real estate, headquartered in San Francisco.
Out of a total of 47 constituent stocks that make up the AltFi Fintech Index, only three produced a positive return during the month.
SoFi gave the largest positive return of all the index’s constituents in February with a rise of 10.7 per cent.
The company is one of the original fintech disruptors, evolving significantly from its original lending-focused business model. Today, it describes itself as “a member-centric, one-stop shop for digital financial services that helps members borrow, save, spend, invest and protect their money”.
Anthony Noto, CEO of SoFi, says 2022 was a strong year for the business.
“We finished a remarkable year with another quarter of record financial results and continued strength in membership and product additions, as well as cross-buy momentum. We generated our seventh consecutive quarter of record adjusted net income, which was up 58 percent year-over-year for the quarter and passed $1.5 billion for the full year, up 52 percent compared to 2021.”
This translated into a record adjusted EBITDA for the fourth quarter of 2022, with over $143 million generated in 2022, nearly five times the total adjusted EBITDA compared to all of 2021.
“This strength carried over to the bottom line, resulting in an incremental GAAP net income margin of 42% for the fourth quarter and 28% for the full year,” Noto said.
Northern Data gave a return of 7.7 per cent, but is still far from the peak in February 2021 with a fall of approx. 90 percent since this date.
Northern Data, is a German supplier of data centers to the crypto and blockchain industries as well as other high-growth sectors such as artificial intelligence.
The latter has seen huge investments from venture capital in recent months on the back of booming global interest in the developments made by Sam Altman’s OpenAI company and its product ChatGPT.
