Nubank completes six months on the stock exchange and absurd fall scares investors

According to an analyst, Nubank has difficulty converting its growing user base into profit. Know more!

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Estimated reading time: 5 minutes

On December 9, 2021, Nubank officially entered the Stock Exchange with one of the largest IPOs in history in terms of number of investors. More than 7 million customers have embarked on the fintech offer and accepted a “little piece” in the company’s public offering of shares.

Although Nubank attracted many eyes at the end of last year with a very elaborate marketing strategy, the situation of the purple so dear to Brazilians is not going very well. Fintech shares have already dropped 50% in six months, scaring many investors.

The influence of a large investor and macroeconomics at the time contributed to the success of Nubank’s actions

Nubank’s shares began trading on the NYSE on December 9, 2021, valued at US$9. However, all the commotion that hit the market at the time today represents an excessive perception of the fintech’s value, according to experts. .

“Nubank had a great advantage, which was entering a very competitive market with a very strong and engaged base of millions of customers. The market thought they were on the right track, they just needed to monetize. Despite being a large company, the valuation was very stretched”explains economist Fabio Louzada to E-Investidor.

However, some factors, at the time of the debut, contributed to investors having high expectations, such as:

  • Influence of the great investor Warren Buffet, who months before the IPO made an investment of US$ 500 million in Nubank;
  • The macroeconomics at the time was not as uncertain as observed in recent months.

Nubank struggles to convert its growing user base into profit

Although some people are not bothered by the situation, most investors are skeptical about the drops in Nubank’s shares.

To Estadão, Rodrigo Lima, investment analyst at Stake, points out that, although fintech presents a solid expansion in the customer base, the company has difficulties in converting this into profit.

To complete, another recent point left investors alarmed: the package of more than BRL 804 million intended for Nubank executives. According to the company, the board members will only win the millionaire package if ambitious goals are reached.

Increase in default brings risks to Nubank

The increase in default is another factor that continues to alarm the market. The high interest rate scenario harms the supply of credit, which is one of the main cash-generating activities in the banking sector. The risk has become greater because the population has been finding it difficult to afford the expenses.

“The company would be able to increase the margin per loan, but this could have a high default rate. The market is suspicious of how Nubank will provide credit in a healthy way to a public that, many times, has never had access to credit”points out economist Fabio Louzada to E-Investidor.

On May 16, Nubank released the financial results for the first quarter of this year. The data show that the fintech recorded a net loss of US$ 45.1 million and a adjusted profit of $10.1 million.

Digital banking revenue hit a record $877.2 million in the first quarter of 2022, up 226% year-on-year. The company’s CEO, David Vélez, said that this was the “strongest quarter” in Nubank’s history.

CEO says he is confident that Nubank will be able to reverse current situation

Nubank CEO David Vélez, who at the end of May reacted to the criticism that fintech has received from investors and analysts, gave a positive assessment of the company’s six months on the New York Stock Exchange.

According to what Vélez pointed out to E-Investidor, the main reason that caused the fall in the shares are the macroeconomic factors (inflation, war in Ukraine and increase in interest rates) that have hit the stock market since Nubank debuted on handbag.

In addition, the executive is confident that fintech will be able to reverse the negative perception of the market and monetize the user base through new products.

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Image: rafapress / Shutterstock.com