This week saw Brazil’s Nubank raising $2.6 billion in a US IPO to become Latin America’s largest bank. It marked a triumphant day for the neobank as it reached a $41.5 billion valuation ahead of planned expansion in Colombia and Mexico. As one of the largest IPOs of 2021, it signalled the arrival of an exciting new face in global banking.
Wednesday’s IPO saw the share price of Nubank hit $9, but as the Brazilian bank made its Wall Street debut on the New York Stock Exchange, the share price started at £11.25. From here, shares in Nubank closed up nearly 15% at $10.33. This pushed the market cap of Nubank up to nearly $50 billion.
The proceeds gained from the IPO listing will be used as working capital to help Nubank expand in a number of ways across multiple territories. It has already gone way beyond being just a credit card brand, and Nubank has found success in a variety of financial services. These include everything from life insurance and personal lending to investment services and support for small-scale entrepreneurs.
Nubank is now Brazil’s third most valuable public funded company, and it had previously been listed on the Sao Paulo stock exchange. The success of Nubank’s US IPO marks an increased sense of optimism about economic growth in Latin America.
There has been over $9 billion invested into the region in the first half of the year which is nearly twice the amount of the same time last year. All of this is impressive given the troubling backdrop of rising interest rates and continued economic fallout from the pandemic. But with new efforts to boost startup activity in everything from ecommerce to artificial intelligence, Latin America’s fortunes could be on the rise.
It’s an impressive start for the Sao Paulo-based brand that was only launched in 2013. Nubank initially started as a high-tech no-fee credit card business that was a marked contrast to how Brazil’s financial companies tended to work.
Rather than the high-fee, low-technology approach favored by many of its competitors, Nubank used digital banking technology to its advantage and has stayed afloat despite the equally devastating effects of a recession and the Covid-19 pandemic.
If anything, the pandemic has been played to Nubank’s advantage as customers could use their smartphones to manage their finances without any fees. With bank branches only operating in approximately 60% of the cities in Brazil, the appeal of Nubank’s digital banking platform is obvious.
In less than a decade Nubank has grown to have a valuation larger than many top US financial services companies, and has just short of 50 million customers in Brazil, Mexico and Colombia. Plus with a $500 million investment from Warren Buffett in Nubank’s parent company, as well as significant backing of around $180 million from the Chinese giant Tencent, it seems that things could be on the up for this enterprising Brazilian banking firm.
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