Most FinTechs IPOed Since 2020 Trade at 54% IPO

FinTechs are burning through cash.

The capital markets are retreating.

FinTech IPOs are under water.

So getting back to Wall Street for more money can be a tough sled.

FinTechs that have gone public since March 2020, if that’s the date — nearly four dozen of them, tracked each week in the PYMNTS FinTech IPO Index — have had a turbulent time on Wall Street.

If there is one certainty, it is that volatility will continue. And if we look at the “average” metrics for our group—average is appropriate because the names are equally weighted—investors have a less-than-snarky view of these potential disruptors who had promised to ride the wave of big digital shift.

The average name on our list trades 54% below the asking price. As we’ve previously spotlighted, only two of the names, Futu Holdings (up 222% from IPO) and Bill.com (up 150%) are up significantly from IPOs. 10x Capital is up 1% from its debut.

Compete against NASDAQ

We also take the liberty of comparing some other metrics with the general markets. Since many of the names have no recorded net income or do not have full year (trailing 12 month) net income under their respective belts, we have chosen to use price to sales (commonly known on the street as P/S) ratios). The most appropriate comp here may be the tech-heavy NASDAQ. The NASDAQ as a whole has a P/S ratio of 4.5x as of Tuesday’s trading action. The FinTech IPO group’s P/S ratio is approximately 3.7x.

The conventional wisdom may be that the FinTech IPO Index and its components are undervalued relative to broader market gauges. But within this discount, we note, there may be a large dose of investor skepticism about the trajectory of these top lines.

The dollar of market value that investors are willing to pay for a dollar of sales is perhaps less because of the perceived risk (it is the opposite, in a way, of lending: We charge higher interest rates when the perceived risk of the borrower, and the odds to recover our capital is less than crystal clear).

Regarding earnings ratio: Only 12 of our names have earnings, and the average is skewed because some names, like Nuvei, have a TTM eps ratio of 75, and others have low single-digit ratios.

Price to sale seems like the most apples-to-apples comp here.

The subdued valuations may make sense given the fact thatas conveyed here, many of the FinTech companies that have gone public in recent years have burned through cash — more than $12 billion last year alone.

Capital has become more expensive due to high interest rates. Stripe can be a warning here, which its valuation fell as it raised capital (supposedly to cover a $3.5 billion tax bill). The business is particularly healthy (ie the capital raising is not driven by any operational pressure) and valuations may be less forgiving for FinTechs that have been less tested by the markets and that do not (like Stripe) process hundreds of billions of dollars in payment volume or generate billions of dollars in the top line.

The IPO markets are uncertain at best, so secondary IPOs may not be certain.

Our own proprietary data shows that “launched” traditional IPOs so far this year in the payments and banking sectors are in the low single digits.

For the FinTech IPO index, times have been tough, to say the least – and there may not be much relief in the cards.