FinTech IPO Index Soars 13% on Paya Deal, BNPL Rally

FinTech IPO, Paya

In a rally that sent all names higher, FinTech IPO Index soared 13.5% through the week.

That’s a milestone — the first time it’s happened since we’ve been tracking these more than three dozen names that have gone public since just before the pandemic.

The rally underscores the positive sentiment that’s taken hold of Tech, at least through the past five sessions. In part, that’s due to investors finding beaten up names that seem due for at least some rebound; in part, macroeconomic data has been a support for that rally.

As PYMNTS reported Thursday (Jan. 12), there have been signs, through consumer prices, that inflation is cooling a bit.

Inflation Cools and Stocks Heat Up

The implication here is that as inflation cools, the Fed will ratchet down its pace of interest rate hikes — perhaps even pause them. In that event, margins abate somewhat. And, in terms of general sector performance, some relief from surging interest rates means that homebuying activity might rebound, which helped Opendoor, by way of one example, jump 14% on Thursday, up by nearly 50% through the past five sessions alone.

As inflation recedes, at least for now, consumer-focused names, and the ones that depend on institutional lending to keep things going, also got a boost.

Affirm gained 32.7% since last week, followed by Upstart, up 32.3%. We’ll know more about consumer sentiment, and the propensity to keep spending, when earnings season hits in full swing. The banks start reporting on Friday (Jan. 13), so we’ll get some card-level data, which would be at least some read-across on transaction growth.

If consumers prove resilient, it’s a positive indication that they’ll be inclined to keep embracing installment and other credit products that are designed to have some more visibility/affordability when it comes to satisfying those monthly obligations.

The FinTech IPO group, of course, does not simply move on the heels of economic data alone. There were individual “stories” that helped buoy sentiment through the past few sessions. One story that’s taking shape, even this early into 2023, lies with consolidation, as mergers may help reshape the payments landscape itself.

Paya rocketed up 25% in the wake of news that it will be acquired by Canadian FinTech Nuvei in a $1.3 billion all-cash deal. Nuvei said at the time of the announcement that Paya integrations with more than 300 independent software vendor (ISV) platforms and commerce solutions will let it “capitalize on the domestic and global software-led market opportunity.” Paya’s customer base also includes B2B goods and services companies. Nuvei shares were up just under 21% during this timeframe.

Some Strategic Initiatives

Separately, Blend gained more than 16%. The company said in an announcement this week that it is undertaking a series of initiatives to speed its path to profitability. Those initiatives include expense reduction, in part tied to staff cuts.

The company said it was targeting a 28% reduction in Blend’s onshore employee base impacting Blend Title and corporate operations. Blend also said it would allocate an increased portion of operating expenses into Blend Builder, the company’s configurable software platform, which “carries a subscription fee on top of success-based transaction fees. This platform is already the foundation of Blend’s non-mortgage offerings.”

Robinhood shares managed to gain 11.5% since the end of last week. The U.S. Department of Justice has seized $465 million in shares that had been partially owned by former FTX CEO Sam Bankman-Fried. SBF, as he is commonly known, reportedly wanted access to the Robinhood shares to help pay legal bills.