Latin American fintech startup Nubank to hit NYSE after $2.6-billion IPO

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Latin American fintech major Nubank will start trading on the New York Stock Exchange on December 9, after it raised $2.6 billion from a public issue on Wednesday, which made it the biggest bank from the region to be listed.

The Sau Paolo-headquartered company sold over 289 million shares at $8 each, it said in a statement.

Nubank was founded in 2013 with the objective to offer easy access to banking services in a region where most financial products are available only to a privileged minority.

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With over 48 million clients in the region, the start-up is now valued at $41.5 billion and the IPO may set off a trend for more start-ups from the region to go listed.

Itau Unibanco, the largest financial institution in Latin America, has a market cap of about $37.5 billion.

What makes this debut interesting is that Nubank is backed by some of the biggest names such as Berkshire Hathaway, Sequoia, Tiger Global, SoftBank Latin America Funds and Tencent Holdings.

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Morgan Stanley, Goldman Sachs, Citigroup and NuInvest managed the offering as global coordinators.

The company now plans to use the proceeds as working capital, operating expenses, capital expenditures and also for inorganic growth.

Market experts believe this is just the beginning for neobanks across the world. “The last few years have seen a global boom in neobanks – banks with no branches that only exist in the cloud and online. Neobanks like Nubank in Brazil, N26 in Europe, and Chime in the US have several distinct advantages over traditional banks,” investment management firm PGIM reportedly said in a recent note.

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Besides easier regulatory standards and liquidity requirements, neobanks are asset-light and do not have large physical overheads, which significantly reduces their cost of customer acquisition.

“With much lower overheads and regulation, neobanks are expanding the consumer banking market and reaching previously disengaged and underbanked populations in ways not economically feasible for traditional banks,” the firm had noted.

Most industry watchers believe traditional financial services, especially in developed markets, are ripe for disruption, and players like Nubank are perfectly placed to cash in on this opportunity.

Emkay Global Financial, in a recent report, noted that fintech is turning a corner as new players such as Nubank are clocking strong business growth at a far lower customer acquisition cost – about $5 for Nubank – that forces traditional players to reinvent their business models.

With inputs from Reuters