It’s been a tumultuous year for the markets – for the slew of crypto firms and online platforms, some of them global in scope – and headed into the new year, the questions surrounding valuation seem pressing.
Are those nascent, digital-only, advanced tech firms being bid up at frothy levels? Undervalued? Or just right?
At this writing, the tech-heavy NASDAQ, a general proxy for new economy firms, is up roughly 20% year to date. The S&P, a more general benchmark, is up 26%.
Drill down a bit, and success depends on where you look. It’s no secret that the interest in bringing FinTechs, online commerce platforms, payment firms and crypto vehicles has been a mainstay of IPOs and SPACs-related activity. As demonstrated in PYMNTS’ own tracking of the listings, banking-focused announcements year to date stood at 66, trailed only by companies that aim to disrupt and change the ways in which enterprises do business.
Read more: Platform Businesses Dominate End-of-Year SPAC, IPO Activity
Funding Rounds and Public Debuts
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Funding rounds and public debuts spotlight the fact that VCs find the great digital shift to be a sustained, and sustainable, narrative deserving of huge amounts of capital, which then will ostensibly play out in the public markets.
But as high-profile as the companies are, no single rising tide has lifted all boats.
In recent days, we’ve gotten a reminder of that: Robinhood, the online trading platform, recently saw its shares change hands at $18.65, down significantly from its July IPO at about $38. Coinbase, the cryptocurrency platform, initially came to market in the spring with a “reference” price of around $250. But the first trade for that company, out of the gate, was about $381 – and now the stock is quoted at about $250.
In terms of the valuation, by way of example, Coinbase, according to Yahoo! Finance, trades at about 35x forward EPS estimates (versus, say, 29x for the NASDAQ as a whole). The crypto companies have models tied in part to a derivative – the value of the cryptos themselves, where volatility spurs trading (and uptrends in prices spur FOMO).
The private markets have been sanguine, too. Again, there are a number of funding rounds with valuations implying strong growth expectations, especially for digital payments. In one example, the payments gateway platform Razorpay has raised $375 million in a funding round, which it will use to invest in the neobank platform, make more acquisitions and enter more markets, which in turn gives it a $7.5 billion valuation. As reported, the round was led by TCV, Lone Pine Capital and Alkeon Capital.
More details: Razorpay Raises $375M Toward Expansion, Acquisitions
Elsewhere, Brazilian FinTech Nubank’s valuation is up to $41.5 billion — higher than the country’s largest bank, Itaú Unibanco, as the company raised $2.6 billion.
Also see: Nubank Goes Public at $41.5B Valuation with LatAm Growth on Horizon
But there may be a disconnect between the private and public market valuations, with December a month that began with nearly half of billion-dollar listings trading below their listing prices, which outpaces the roughly 27% of firms that were “busted” IPOs in 2020. That might be a yardstick that gives at least some hint of the concern about valuations coming into the new year.
Related news: 49% of 2021 High-Profile IPOs Trading at Below Listing Price
