Nubank (NASDAQ: NU) is a fintech company based out of Sau Paulo, Brazil, and its $41 billion IPO valuation makes it the largest digital bank in the world. Nubank has featured on CNBC’s ‘Top 50 Disruptors’ list, TIME’s ‘100 most Influential companies’, and were ranked as ‘#1 Most Loved Brand’ in Brazil by eCGlobal.
What does Nubank do?
Founded in 2013, CEO David Vélez decided to set up Nubank after having to wait more than six months to open his bank account in Brazil. Five banks controlled 80% market share at that time, with bureaucracy and high fees acting as a considerable pain point for both banked and unbanked customers.
So, along comes Nubank, the fee-free mobile-native intending to solve these problems.
Its products include personal and business accounts for spending and saving, credit cards, loans, insurance, and its latest service will include an investment platform, something we can definitely get behind! It will also be introducing a ‘Buy Now, Pay Later’ feature, allowing customers to make credit and debit card purchases in up to 12 installments.
When can I buy Nubank Shares?
Nubank made its public debut on December 9, 2021. A total of 332 million shares were made available at a price of $9, which includes 43 million Brazilian Depositary Receipts (BDR’s) which will be listed and trade on the Sao Paulo stock exchange, with the remainder to list and trade on the New York Stock Exchange (NYSE) under the ticker NU.
The company said it may issue one of these BDR’s, which is a shareholding in the company, to all existing members of Nubank for free.
Total revenue for the 9 months ending 2021 was $1.06 billion, almost double that of revenue in the year prior for the same period. Customers grew 60% year-over-year, now at over 42 million members compared to 30 million in 2020. The monthly average revenue per customer also grew to $4.10 from $3.90.
With this rapid growth, marketing spending was still only $45 million in the first 9 months of 2021. Although it has actually quadrupled year-on-year, this is a relatively small amount for a company of its size and Nubank claims 80-90% of customer acquisition is all organic.
Nubank’s growth potential
COVID-19, despite bringing economic uncertainty, has led to greater adoption of digital banking in Latin America (LATAM); 40 million people signed up for banking services in the last 5 months alone in the region. Since March 2020, 17 million Brazilians have opened bank accounts, and Nubank has nearly doubled its clientele in the same period. In LATAM, only 20% of commerce is done online — compare that to 50% in the U.S., and circa 70% in China — so Nubank still has plenty of potential growth ahead of it.
It also has the backing of well-respected investment firms; Berkshire Hathaway (NYSE: BRK.B) is among the companies that have already built a position in Nubank in a private funding round, investing $500 million at a valuation of just $30 billion.
There are a couple of negatives with the company, however. The first is access to a qualified workforce. Engineers and developers are front and center with fintech organizations, but when it comes to the availability of tech-literate graduates in the region, demand for these roles far exceeds supply.
The second is inflation. Brazil, and the LATAM region in general, are showing signs of economic uncertainty and inflation is reaching multi-year highs right now. This could adversely affect Nubank’s credit business if low-quality loans led to defaults. Interest rates could rise too, which may be unfavorable for Nubank credit customers in terms of affordability, especially for younger, or lower-income bracket customers.
This is definitely one of the more exciting companies to hit public markets, but for the moment, it may be one to watch from the sidelines as the economic situation plays out and we can see how Nubank performs in its first few quarterly reports.
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Financial Writer at MyWallSt
David's favorite stock is Google. He's a daily user of its YouTube platform, where you can learn or find something brand new at the touch of a button. He believes the company will continue to grow for many years to come.