Is Nubank’s Lower IPO Pricing Bad News for Brazilian Startups?

Is Nubank’s Lower IPO Pricing Bad News for Brazilian Startups?

The parent company of the famous Latin American neobank Nubank, Brazil’s Nu Holdings, revealed a drop in the estimated price of its first public offering this morning, The well-funded fintech is preparing to go public in the United States and Brazil, and is one of the final businesses TechCrunch is following for a 2021 debut. Nubank stated in its first F-one filing that it anticipated to sell its shares for up to $11 per share, raising a maximum of $3.66 billion in its public-market floatation. The business now expects an IPO price of $9 per share and maximum fundraising of $2.86 billion.

The company’s decreasing price trend is disappointing, but it will still command a high value when it raises billions in an IPO. On December 8, Nubank scheduled to price its initial public offering. What is wrong with an IPO that was supposed to represent a watershed moment for Brazilian digital businesses, and fintech startups in general? We dissected Nubank’s revised public offering values and investigated if the company’s downward adjustment will have an impact on Brazilian entrepreneurs in general. Let us discuss it.

The Nubank IPO is a little complicated since the business is offering Class A shares on the New York Stock Exchange in the United States and BDRs, or Brazilian Depositary Receipts, on the B3 stock exchange in Brazil. This, along with indications of interest in further shares from a number of the company’s supporters, makes for an intriguing package.

However, we cannot afford to waste time, so let us collect some values in order to better comprehend the company’s new expected valuation. Nubank claims that following its IPO, the company will have 4,608,684,459 ordinary shares outstanding, which climbs to 4,637,255,888 when equity held for underwriter purchase is included. Using that higher number, the business would be worth between $37.1 billion and $41.7 billion at its IPO price range of $8 to $9.

Those figures, however, represent only half of the picture. At its initial IPO price range of $10 to $11, Renaissance Capital projected that the firm was worth $50.8 billion at $10.50 per share on a fully diluted basis — including stock options that had vested but had not yet been exercised, etc. Nubank’s fully diluted valuation is $43.5 billion when converted to $9 per share, the high end of its current range.