FinTech IPO rises 2.1% as platform shares swing wildly

The platforms held until the last week – where volatility reigned on Wall Street.

And within the FinTech IPO stock index, we saw winners and losers in about equal measure, with double-digit moves to the upside and downside … and the result was that over the last five sessions, the index was up 2.1%.

So far this year, the group is up 11.4%.

And to get a sense of how significant the moves have been—albeit from low bases, as many of these names are small or micro-cap stocks when it comes to market capitalization—consider that 9F Group rose 49%.

There were no headlines in the trade press or from the company itself to explain the move, as was the case with XP, which rose 26%. Katapult, which is focused on e-commerce through an omnichannel point-of-sale platform, gained 14%.

Lufax and Robinhood among important news creators

China-based Lufax, which operates as a personal financial services platform, filed 20-F with the SEC. In that filing, the company noted that it had a total of 19.0 million borrowers as of December 31, 2022. The total outstanding balance of loans was RMB 576.5 billion (US$83.6 billion) as of December 31, 2022. Of which 29.7 billion RMB (US$4.3 billion) or 5.1% consists of loans enabled by Lufax’s licensed consumer finance subsidiary. Small business owners accounted for 86% of all new loans activated under the company’s Puhui brand in 2022, up from 78% in 2021.

Robinhood stock rose 3.3% that week.

As we reported here, Robinhood has reached a $10.2 million settlement with state securities regulators over operational and technical errors. The settlement includes the platform’s outage in March 2020 and operational deficiencies prior to March 2021. These failures left stock trading and investment platform users unable to process trades.

An investigation led by state securities regulators in Alabama, California, Colorado, Delaware, New Jersey, South Dakota and Texas found that prior to March 2021, Robinhood had deficiencies in its review and approval process for options and margin accounts, monitoring and reporting tools, and customer service and escalation protocols.

SoFi was 2% higher.

Jefferies reiterated a buy rating on the stock, tied in part to the company’s Wyndham acquisition, which the sell side expects will help accelerate mortgage originations.

In our own reporting on the company in the last week, we wrote that “the push and pull on student loans has put a spotlight on SoFi’s digital platform model and the emergence of electronic financial services ecosystems.” SoFi has filed suit to stop the Biden administration’s continued moratorium on student loan payments.

U.S. Rep. Ayanna Pressley (D-Massachusetts) and Sen. Elizabeth Warren (D-Massachusetts) sent a letter to SoFi alleging the lawsuit is an “attempt to use the courts to enact a backdoor repeal of this payment freeze.”

In the lawsuit, SoFi (specifically SoFi Lending Corp.) reports that “it competes with the federal government for federal student loan borrowers by offering them private financing under more favorable terms. In addition to lower interest rates and revised loan terms, SoFi also offers deferment and forbearance for qualified borrowers under certain circumstances, for example during periods of higher education or financial difficulties.”

But the moratorium, the company has said — where privately refinanced loans like SoFi’s are not eligible — “has eliminated the primary benefits of student loan refinancing. Essentially, SoFi is forced to compete with loans with 0% interest and where any ongoing principal repayment is completely optional.”

Loan origination last year was 1/10 of the refinancing volumes seen in 2019. SoFi claims in the filing that it has lost approximately $300 million to $400 million in total revenue from its federal loan refinancing business during the moratorium. As a result, SoFi has lost roughly $150 million to $200 million in the same time frame.