The FinTech IPO index opens 2023 with a 2% gain
With a gain of 2%, things are already looking up for the FinTech IPO index.
This statement shows how low the bar has been set for the group, which, as highlighted here, was halved – and then some – last year.
We’re just being a bit tongue-in-cheek here – a few trading days isn’t a trend, and a low single-digit percentage point spread is just a blip – and there’s about 51 trading weeks left in the year. The long road to 2023 stretches before us, and the problems of 2022 remain intact.
These issues have a lot to do with interest rates, as the specter of higher interest rates remains one that hangs over stocks in general, and FinTech IPO names in particular.
Economic figures published on Thursday (January 5) show that the labor market is still tight. The ADP National Employment report showed private payrolls grew by 235,000 positions last month. Tight working conditions lead to higher wages, which leads to inflation.
Inflation drags on business and consumer spending, which in turn hits digital upstarts’ earnings, delaying profitability (many of the names in our group have yet to stop the flow of red ink).
Relief Rally or Dead Cat Bounce?
Thursday’s trading action is emblematic of the relief rally – if we want to call it that – that has been in the works, at least for some individual names.
In fact, some FinTech stalwarts have risen double-digit percentages as measured by the last trading days of 2022 that no one will remember.
An emergency meeting must show persistence; a “dead cat” bounce would be one that simply sees a stock price decline continue after a few days of decline. The saying goes in Wall Street parlance that even a dead cat will bounce if it falls far enough and hard enough.
Despite the general decline in stocks on Thursday in the broader markets, Katapult was up 12%, and over the past few sessions is up 35%. The name has kicked off an announcement in late December that it has partnered with iBUYPOWER, which manufactures custom high-performance gaming PCs, to give consumers a way to buy gaming gear.
Paysafe has accumulated 31% over the last five sessions. The company said near the end of last year that ING Germany, the third largest bank in Germany, had partnered with Paysafe’s cash arm viafintech to enable users to make cash deposits or withdrawals from participating merchants.
Hippo Insurance has also gained 31% over the same time frame, only slightly followed by Blend, up 30%.
Futu Holdings was up 11% on Thursday but is down more than 21% over the past five sessions, a downward trend that follows news that the China Securities Regulatory Commission said the company broke laws by allowing mainland consumers to make cross-border transactions.
Corrective measures will be in the works, according to reports, and the company has been ordered to stop taking on new accounts from mainland customers. Separately, the company said it has postponed its planned dual listing on the Hong Kong Exchange.
The next few weeks will tell. Earnings season starts in earnest at the end of next week, when the big banks start reporting their results. And credit card/consumer spending and mortgage originations will say a lot about the future prospects of the names in the FinTech IPO index, since so much depends on individuals and families continuing to open their wallets.
The common theme that runs through it all is that the digital disruptors need consumers and businesses to keep shopping.
PYMNTS data: Why consumers are trying digital wallets
A PYMNTS study, “New Payments Options: Why Consumers Are Trying Digital Wallets” finds that 52% of US consumers tried a new payment method in 2022, with many choosing to try digital wallets for the first time.
