Fear and loathing in fintech IPO-land

Chief financial officers are a lot like London buses.

Yes, they are both expensive, but more in the sense that you wait ages for one and four come along at once.

Last week we covered the arrival of a new bundle of CFO joy at Plaid, ClearScore, ThinCats and Moonfare, where the existing CFO has been promoted to CEO. 

This follows new CFOs-galore at CashPlus, Provenir and LHV Bank in recent weeks and months and dozens of others reported by AltFi in 2023 including Wise, N26 and Revolut. 

Why? 

It could just be a coincidence, of course. Or the normal course of business but just a bit more clustered than unusual. Or, perhaps even, a trend that speaks to a deeper narrative? 

CFOs are second only to the CEO of a company in terms of importance, and even in some cases can out-earn the top job in the world of technology-focused startups.

Of course, fiduciary responsibility is key for every company, big or small. But for companies navigating rapid growth fueled by huge injections of investors' capital, it's absolutely critical to both long time but also shorter-term survival.

A broad push for profitability in fintech land has brought this into even sharper focus in recent years as companies have been forced to lay off tens of thousands of tech employees to extend runways sufficiently enough to stay afloat.

The appointment of Expedia's Eric Hart as Plaid's (first ever!) CFO in particular sparked off speculation it could be gearing up for an IPO in the not-too-distant future.

No doubt, IPOs have not exactly been en vogue in the past two years but fintechs may well be thinking ahead and laying the groundwork early in preparation (and hope) for a 2024 rebound in sentiment. 

The AltFi Fintech Index, our benchmark of c.60 'pure play' listed fintech companies, offers a unique view into the performance and the valuations.

For those fintechs considering an IPO - both the senior leadership and leading investors in the company - their needs to be positive momentum in the both the broader market and specifically among similar companies already listed to become comfortable enough that the risks of an IPO flop are low.

While the AltFi Fintech Index remains in positive territory in 2023 so far with an 11.2 per cent return, the index is currently hovering around a six month low after spending most of the year rallying, up to nearly 50 per cent in the summer. 

The AltFi Fintech Index is still ahead of the broader market in 2023, with just over 1 per cent gain on the S&P 500’s 10.4 per cent return for the year so far but it’s trending down points to a clear trend beginning at the end of July. 

All in all, 33 out of 61 constituents of the index are in positive territory this year with the rest down as much as 50 per cent in a few cases. 

If the animal spirits of the 2021 fintech IPO bonanza can come back in 2024, there will need to be some stronger performance from existing listed fintechs.

However, the choppiness of the market belies some strong performers, most notably Nubank which has become something of a fintech stock market darling. Morgan Stanley has just come out with a bullish 300 per cent uptick for Nubank next year.

Nubank is already up about 130 per cent this year with a market capitalisaiton not far off rival Paypal (also in the index). Ten other constituents have doubled investors' money this year.

Of course, CFOs will have their inboxes busy as we wait for a return in sentiment to continue most pertinently on that other great fintech challenge. Profitability.