By Daniel Lanyon on Friday 17 March 2023
February was a tougher month for financial technology stocks with only a tiny fraction making positive returns as macro concerns hit the share prices of high-growth companies.
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 bounceback in sentiment seen in January, the AltFi Fintech Index fell 8.7 per cent during the month.
By comparison, the MSCI World Index, which tracks thousands of the largest global companies, fell 2.7 per cent in February.
Asset management giant Amundi notes that global appetite for exchange-traded funds (ETFs) - a proxy for sentiment to risk markets - cooled in February. Despite ETFs seeing inflows of €14.9bn, the month also represented the lowest allocation to ETFs since April 2022.
This, Amundi says may well reflect investor concerns about the direction of interest rates.
“European investors added €6.8bn while US investors allocated €6.1bn, breaking the long-run trend of the North American market usually being several times larger than the European one,” Amundi said.
In February, nearly all of the index’s constituent companies’ share prices came under pressure with Open Door Technologies the worst performer with a 40 per cent fall.
Open Door is a digital platform for residential real estate, headquartered in San Francisco.
PayPal was another notable company that clocked a fall for February, dipping 11.2 per cent.
Out of a total of 47 constituent stocks that make up the AltFi Fintech Index, just three made a positive return during the month.
SoFi made the largest positive return out of all of the index's constituents in February with a 10.7 per cent upswing.
The company is one of the original fintech disruptors, evolving materially from its initial 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 member and product adds, as well as cross-buy momentum. We generated our seventh consecutive quarter of record adjusted net revenue, which was up 58 per cent year-over-year for the quarter and surpassed $1.5bn for the full year, up 52 per cent versus 2021."
This translated into a record adjusted EBITDA for the fourth quarter of 2022, with over $143m generated in 2022, nearly five times the total adjusted EBITDA compared to 2021.
"This strength carried through to the bottom line, resulting in an incremental GAAP net income margin of 42 per cent for the fourth quarter and 28 per cent for the full year,” said Noto.
SoFi operates through a membership model. It saw strong year-on-year growth last year. It added 480,000 new members in the last three months of the year bringing total new members to 5.2 million, up nearly 51 per cent over the course of 2022. The fourth quarter of 2022 was the company's second-highest quarter in terms of new member adds.
Northern Data made a 7.7 per cent return but is still hugely off its peak in February 2021 with a c.90 per cent fall since this date.
Northern Data, is a German provider of data centres to the crypto and blockchain industry as well other high-growth sectors such as artificial intelligence.
The latter has seen huge investment from venture capital in recent months off the back of booming global interest in developments made Sam Altman’s OpenAI company and its product ChatGPT.
21 March 2023
Daniel Lanyon