Nubank IPO: Everything you need to know about Nubank
Ben Lobel November 22, 2021 9:55 AM
Can Nubank eclipse rivals Revolut, Chime and N26 following its highly-anticipated market debut? Here’s the lowdown on the neobank’s history, strategy and valuation journey in advance of the imminent Nubank IPO.
Nubank IPO: What do we know about the Nubank IPO?
Nubank filed paperwork for its New York Stock Exchange IPO on October 27 2021, with the listing potentially taking by the end of 2021. The company is seeking to raise up to $3.2 billion, with 289 million shares to be priced between $10 and $11 each. The target valuation will be some $50 billion.
Underwriters for the transaction will be Morgan Stanley, Goldman Sachs, Citigroup, and others.
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How much is Nubank worth?
Nubank is worth some $29.3 billion following its Series G round of $750 million raised in June 2021. This valuation is a significant step up from the $9.6 billion mark following its 2019 $400 million raise. However, it is aiming for a valuation of $50 billion for its upcoming IPO.
What is Nubank?
Nubank is a São Paulo-based neobank – sometimes called a challenger bank – with global offices in Germany, Argentina and Mexico. The company offers services comprising digital accounts, life insurance and investments, personal loans, and an international credit card controlled via a mobile app.
The business was started in 2013 by Colombian entrepreneur and former banking professional David Velez, together with software engineers Edward Wible and Cristina Junquiera. The idea for the company was born of Velez’s frustration with the process of opening a bank account when he first lived in Brazil.
Fuelled by the challenge of disrupting a highly-regulated, oligopolistic and change-resistant industry, Velez set out to build a new bank with a different approach. Noting that Brazil’s 200 million people were armed with 90 million smartphones, Velez’s vision placed smartphone use at the heart of Nubank’s user experience, betting on customers’ readiness to switch from the inflexible domestic banking incumbents. On completion of the technology, the early increase in users was driven almost entirely through word of mouth and referrals.
Nubank raised a Series A round of $14.3 million in 2014, led by Velez’s former employer Sequoia Capital. The investment represented the first foray into a Brazilian startup for the Silicon Valley-based Sequoia. Following the round, the company received applications from some 200,000 customers. A Series B round of $30 million followed in 2015, with the funding earmarked for optimising the company’s algorithms and expanding its user base beyond its core of affluent millennials.
Over the following years, the company secured ever-increasing tranches of cash via a Series C of $52 million in 2016, a Series D of $80 million in 2016, and a Series E of $150 million in 2018.
By the point of the Series F round of $400 million in 2019 and Nubank’s $9.6 billion valuation, the company boasted 12 million customers, but as of the June 2021 Series G round, this number had grown to 40 million. The company has over 3,700 global employees and some $878 million in revenues for 2020.
Who are Nubank’s competitors?
Nubank’s competitors can be said to be a mix of traditional banks and rival neobanking operators. Domestically in Brazil, the company is competing for banking services with the established ‘Big Five’ of Itaú Unibanco, Caixa, Banco do Brasil, Bradesco and Santander. However, many believe that the future of banking is in the hands of next-generation neobanks such as UK brands Revolut and Monzo, America’s Chime, and Germany’s N26.
In terms of customer base, Nubank seems to have a substantial head start on its neobank rivals, although most of its customers are in Brazil. Nubank’s 40 million customers as of June 2021 compares to 15.5 million claimed by Revolut as of July 2021, some 13 million for Chime as of September 2021 stats, and 7 million for N26 as of January 2021.
Those interested in speculating on the company following its IPO will be well advised to keep an eye on the race to scale customer bases, the operators making the most effective inroads into international markets, and the innovative new service offerings that prove most popular with customers.
How does Nubank make money?
Nubank makes money through a range of fees including interchange fees, which are accrued when customers use their Nubank credit card in stores and online, as well as through interest on customer deposits, overdraft fees, interest from loans and insurance premiums.
What is Nubank's business strategy?
Nubank’s business strategy began with the central premise of giving people better control of their finances, providing free, easy-to-use products supported by excellent customer service.
The app-controlled credit card was the initial offering, but the company developed more services in time to match those of its rivals, from personal loans to life insurance. In 2019, armed with a fresh round of $400 million, the company began to expand beyond its home market of Brazil, opening its Mexico and Argentina offices. In 2021, the company changed its branding to accentuate the idea of its ‘closeness to people’.
The company has made a series of acquisitions, mainly in 2020 and 2021, that give insight into its strategic direction. July 2020 saw the purchase of US software consultancy Cognitect, the firm behind the Clojure programming language that underpins Nubank’s technology, with the move expected to facilitate a transition to the US market.
In September that year, Nubank acquired Brazilian digital investment platform Easynvest, which has 1.5 million users, to move the company into the world of investing and keep pace with investment offerings provided by the likes of Revolut.
In August 2021, Nubank acquired Juntos, a communication platform that connects banks and clients, as well as instant payments operator Spin Pay. Then, October 2021 saw Nubank snap up AI-powered financial advisor Olivia in a bid to add financial management to the list of Nubank’s accountholder perks.
Moving forward, the strategy is likely to focus on continued geographical expansion, more business banking products, and further expansion into the unbanked segment.
Is Nubank profitable?
Nubank has shown signs of profitability of late, revealing a net income of 76 million Reais ($13.7 million) in the period between January and June 2021 for its Brazilian operation. Prior to this, the company saw a loss for 2020 of 230 million Reais ($41.1 million), marking an improvement on its 2019 loss of 312 million Reais ($55.8 million).
However, Velez has stressed the importance of prioritising growing the customer and profit base over profits for now, so consistent net profits – and dividends – may be some time away.
Who owns Nubank?
Nubank is owned by a range of individuals and organisations, including founder Velez but also investment giants such as Sequoia Capital, Sands Capital and Warren Buffett’s Berkshire Hathaway. Chinese tech giant Tencent also holds a stake in the company.
Key personnel of Nubank
David Velez – Co-founder and Chief Executive Officer
Cristina Junqueira – Co-founder and VP of Branding and Business Development
Adam Edward Wible – Co-founder and Chief Technology Officer
Gabriel Silva – Chief Financial Officer
Glenn Vanderburg – Director of Engineering
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