ChimeIPO to test the open market appetite for fintech when companies leave

There is a mini-boom in FinTech.

After a multi-year slowdown in IPOs triggered by rate rises and valuation resets, some emerging players in online stock trading, banking, lending and crypto services are either clashing into the open market or at least preparing to debut.

The next test of Wall Street enthusiasm is set to take place on Thursday, when Chime is scheduled to open trading on the Nasdaq. The online banking service provider offered a price range of $24-$26 per share. This corresponds to a market capitalization of around $9.1 billion in the middle of the range, but that number is completely diluted. IPO prices are scheduled for the second half of Wednesday.

This is a big step away from where venture investors like Sequoia Capital valued the company in Chime’s final funding round in 2021, when the private tech market was raging. The reported valuation at the time was $25 billion, and according to Chime’s IPO prospectus, the stock was $69. It’s an industry-wide dynamic, just as technology executives and investors consider the new reality.

David Golden, a longtime fintech investor and partner at Levolution Ventures, said in 2021 that the capital is extremely abundant, “stakes are basically free” and “you can sell stocks at a price under any circumstances.

“You saw a valuation reset in the market,” said Golden, who previously led the practice of JPMorgan Chase’s Tech Investment Banking. Now the windows look open and “I basically said, ‘Look, we don’t really need the money,’ but I think it’s time,” Golden said.

A Chime spokesman declined to comment.

There is a reason for optimism.

LAT Month, Trading App Etro It debuted in the market and jumped 29% on its first day, but hasn’t had much stock since. That same week, Mike Novograts’ Cryptocurrency Galaxy Digital He eventually joined the Uplist by TSX and made his US debut.

Then came the Crypto Company Roundits blockbuster list helped solidify what appears to be a true reopening of the fintech IPO market. Circle is trading above $118 with a market capitalization of $26 billion after priced at $31.

Others are on the horizon. Klarna, a provider of Now Buy, paid the loan later and filed a prospectus in March, but later delayed offerings a month after President Donald Trump’s sweeping fees came to the market. The company has not provided any updates on the timing, but reported nearly $100 million in quarterly losses in May.

Gemini, a crypto company founded by Winklevoss Twins, said last week it had filed its IPO in secret. A report from the Financial Times on Tuesday also secretly submitted crypto exchanges backed by Peter Thiel.

To open a company like Chime, it requires the recognition that the market has changed dramatically a few years ago. For Sequoia, Softbank and Tiger Global, all of them wrote checks on Chime’s 2021 funding round mean it will be scattered around that investment and help Wall Street recover.

Stripe, the most valuable US fintech, has returned to its peak. After raising it at a $95 billion valuation in 2021, the company cut its numbers from almost half to $50 billion in 2023. Earlier this year, the company returned to $91.5 in a tender offer to employees and shareholders. However, Stripe shows no urgency to collide with the open market as it is able to hold secondary products regularly.

In the case of Chime, revenue for the most recent quarter rose 32% from the previous year to $518.7 million. Net income shrunk from $15.9 million a year ago to $12.9 million.

“They believe they have enough support to raise meaningful capital and get the acquisition currency to go out and acquire other companies,” Golden said.

Even if the valuation goes down, Chime’s IPO will create large pay for previous supporters such as DST Global Capital and Crosslink Capital, the company’s biggest outside investors.

Silicon Valley investors are desperate for returns after a long drought. According to the National Venture Capital Association and Pitchbook, the first quarter exits reached the highest quarter value since the fourth quarter of 2021, but nearly 40% came from a single IPO. That’s what the IPO was coreweavean artificial intelligence infrastructure provider.

“The sponsors and advisors are very realistic,” said Ryan Gilbert, general partner at LaunchPad Capital, and “it will make sure the windows are open.”

“But I don’t think they know how high the windows are from the floor,” Gilbert said. “And I think we’ll complete the IPO and start trading rather than risking aggressive pricing.”

He said Chime is a business that spent a lot of money seducing customers. This is a major challenge for small businesses that lack universal brand awareness. According to the prospectus, Chime paid the NBA’s Dallas Maverick about $33 million over three years, wearing the logo as a patch on his player jersey.

Chimes now have to prove that they can take advantage of all their marketing spend and retain customers as it competes with existing people square, PayPal and Sophie.

Chimes are not banks, but most of their services are at the heart of consumer banks. It generates revenue primarily through interchange-based fees for debit and credit card transactions.

“It’s very simple,” said Dan Dref, analyst at Mizho. “I’m actually amazed at how refined the business model isn’t really.”

How well the market receives its model and chime storyline could have a major impact on the rest of the space for FinTech.

“I think they’ll see chimes as a potential canary in the mine,” Golden said. “If that goes well – and in the next two to three months, I think you’ll see more acceptability,” he said.

“If things don’t work, I think they’ll continue to sit in their hands and wait for it,” Golden added.

Watch: IPO appetites are abundant