Why The Fintech IPO Window Is ‘Essentially Closed’ In 2022 – Coinbase Global (NASDAQ:COIN)
Rising interest rates have crushed high-growth tech stock values in 2022, and most of the high-profile fintech IPOs of recent years are now trading well off post-IPO highs. On Wednesday, DataTrek Research became a co-founder Jessica Rabe said fintech startups now rely on private funding.
Coinbase Global Inc COIN, SoFi Technologies Inc SOPHIE and Robinhood Markets Inc HOOD were three of the highest-profile fintech IPOs of 2021. At this point, the three stocks are down 86.5%, 74.2%, and 66.9%, respectively, over the past year.
“With high-profile IPOs from last year well below their peaks (ie Coinbase, Robinhood and SoFi), the fintech IPO window is essentially closed,” Rabe said.
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The numbers: The financial services sector raised $131 billion in venture funding in 2021, more than any other group. While fintech venture capital funding has declined every quarter so far in 2022, Rabe said it remains a popular investment area for VC firms. So far this year, finance companies have raised $56.2 billion in funding, well ahead of the full year in 2020 ($34.2 billion), 2019 ($34.9 billion) and 2018 ($52.6 billion).
In 2022, high-profile fintech companies will no longer choose to go public to raise capital. For example, “buy now, pay later” company Klarna raised $800 million in July in a private funding round led by Sequoia, Silver Lake and the Commonwealth Bank of Australia.
“Fintech and financial services startups have been hit by a difficult macroeconomic backdrop just like many other categories, but it continues to stand out as one of VCs’ favorite sectors to support,” said Rabe.
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Despite the recent valuation hiccup, Rabe said VC investors recognize that fintech companies still have long-term opportunities to disrupt the traditional financial sector in a similar way that e-commerce companies disrupted the warehouse industry.
Benzinga’s Take: It may be a while before the average retail investor gets a crack at another round of high-profile fintech IPOs now that the 2021 IPO wave has died down. In the meantime, investors can stay up-to-date on the most cutting-edge fintech startups by attending the Benzinga Fintech Deal Day event in New York City on December 8.
Photo: courtesy of shutterstock.com
