After two rollercoaster months, the AltFi Fintech Index recorded a small loss in March. But under an apparent sea of calm, a number of choppier currents were at play.
The AltFi Fintech Index was broadly flat in March, falling 0.56 per cent against a 3 per cent return for global equities, measured by the MSCI World index.
While the net return of the AltFi Fintech Index, which is made up of c.50 publicly listed fintech stocks, implies a muted market, the reality was anything but that.
Just under half of the constituent stocks made a positive return in the month. 11 of these stocks return double digits and three made over 20 per cent.
The best performer was Northern Data, a German provider of data centres to the crypto and blockchain industry as well as other high-growth sectors such as artificial intelligence, which also made a 7.7 per cent return in February.
Opendoor, a San Francisco headquartered digital platform for residential real estate, made 22.8 per cent in the month of March. This follows a 40 per cent plunge in February as some sentiment returned for the company.
Marathon Digital Holdings, which engages in the mining of cryptocurrencies, has a market cap of c.$2bn.
A small majority of stocks lost money over the course of March. While for the most part, these were single digit dips, two stocks lost substantial ground.
Katapult, an e-commerce-focused fintech founded by Chinedu Eleanya, Andrew Hancox, and Brandon Wright in 2012 saw its share price plunge ahead of its fourth quarter 2022 financial results.
Over the course of March, it fell, ending the month down 53.9 per cent.
Investors appeared nervous following the reporting of $48.8m of revenue, a drop of $24.5m, or 33.4 per cent compared to the prior year period.
Of the total $24.5m decrease, the company says $9m was a result of the adoption of new accounting rules governing leases ASC 842 from January 1, 2022.
This further translated into a net loss of $14.4m for the company for the fourth quarter of 2022.
While the company is still expecting to see originations grow in 2023, it also flagged that consumer headwinds were likely to persist.
“Historically, lease-to-own solutions benefit from periods of shrinking prime credit availability, creating a counter-cyclical hedge against a challenging macro-environment,” it said.
A number of constituents were reported to be song those exposed to the collapse of Silicon Valley Bank (not a portfolio constituent of the index).
SVB’s exit wiped out all of the value for its equity and bondholders but depositors were protected after the US government stepped in over the weekend following the news breaking that it was under pressure from a bank run.
According to Moody’s March saw the highest instance of corporate debt issues defaulting for nearly three years.
The March defaults add to an overall tally of 33 defaults for the first quarter of 2023. This is the highest quarterly count since the fourth quarter of 2020 and up from 25 defaults in the first quarter of 2022.
“Three US financial institutions defaulted in March: Silicon Valley Bank, its parent bank holding company SVB Financial Group, and Signature Bank. SVB was the first Moody's-rated US banking organization to default since 2015, when Doral Financial Corporation, a US bank holding company, filed for Chapter 11 bankruptcy protection following the failure of its unrated bank subsidiary, Doral Bank.”
Moodys pointed to the interest rate and asset liability management risks, sector concentration and weak governance contributing to the collapse of SVB.
But it added that most defaults appeared to be occurring outside of the financial sector.
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