FinTech

When Will More FinTechs Go Public?

For the past several years, even as there’s been plenty of chatter about FinTechs entering the mainstream, only a few of these companies have taken the step of going public. Of course it’s easy to see why when you consider that both Lending Club and OnDeck have struggled to retain their market valuations after going public (although Square has fared much better since their November 2015 IPO). These disappointing performances coupled with an overall draught in tech IPOs may have dissuaded some emerging FinTechs from following suit, but there is some reason to think that could change.

As Business Insider notes, tech IPOs are on the rise once again. In fact 2017 has already seen 11 tech startups go public compared to just four in 2016. At the same time the FinTech sector has some newly certified unicorns — a term that implies a certain rarity that is hardly applicable at this point —  with Coinbase, Robinhood, and more than a dozen others joining the billion-dollar valuation club in the past year. So could more FinTech IPOs be on the horizon?

One recent IPO that many FinTechs will surely be monitoring is Elevate Credit ($ELVT). The subprime lender with an emphasis on analytics went public in April of this year with a price of $6.50 per share. As of this writing, the stock is trading for about a quarter above that price. Unfortunately it should also be noted that Elevate was originally expected to debut with a price in the $12 to $15 range before settling for nearly half that. While that’s not an assuring sign for FinTechs, it’s hard to say if investors’ aversions are to the alternative lending field itself or the subprime market that serves as Elevate’s specialty.

Looming over the FinTech IPO field nearly as much as who did go public is who hasn’t: SoFi. That online lender, which is valued at over $4 billion in the private market, had been eyeing a late 2016 initial public offering but later pushed back their plans indefinitely. Sources recently told CNBC that an IPO from the company could now be more than a year away. Naturally the aforementioned Lending Club and OnDeck stocks are often mentioned when articles about SoFi’s public potential are written, with analyst Bob Ramsey telling Bloomberg, “Lending Club and OnDeck were the two pioneers in the marketplace to go public and those stocks haven’t worked. That does mean investor appetite is muted. So it’s not surprising that guys like SoFi will say ’we liked LendingClub’s IPO valuation better than the current valuation so let’s wait until the market is receptive, then we will do it’.”

With all that said, there still seems to be some hope for FinTech IPOs in the coming years. Afterall that term casts a wide net, including everyone from the market-maligned alternative lenders to consumer services brands like Credit Karma (another rumored IPO candidate). However, with private valuations continuing to prove a hard sell on the public market, many of these emerging unicorns might elect to simply wait and watch how others perform. Sadly, until some more brave companies come forward to try their luck on the open market, it seems less likely that FinTech will not reach the mainstream levels it’s long been expected to.

Also published on Medium.

Other Articles by Jonathan Dyer