What happened
Shares of the Brazilian fintech company Nu Holdings (NU -1.69%) shot up nearly 15% today after going public yesterday. With the initial public offering price at $9, Nu raised roughly $2.6 billion in IPO proceeds and is up nearly 32% on the week.
So what
Nu, which offers digital banking services to a whopping 48 million customers in Latin America, is one of the largest IPOs of the year. Most traditional banks in Brazil charge very high fees and make simple banking processes much more difficult than here in the U.S.
Image source: Motley Fool.
Nu really disrupted the market, giving millions of people in Brazil and Latin America their first-ever bank or credit card account. The company first offered a credit card with no annual fees and then expanded into cash management accounts, personal loans, payment capabilities, and online investing. Nu services more than 1 million business customers as well.
Warren Buffett and his company Berkshire Hathaway (BRK.A 1.18%) (BRK.B 1.30%) invested $500 million in Nu earlier this year when it had a roughly $30 billion valuation. Now, Nu has a nearly $55 billion market cap, so the Oracle of Omaha is seeing some nice gains on this one.
Now what
I am pretty surprised -- but also impressed -- to see Nu trading so strongly off the IPO. Prior to going public, Nu dropped its valuation from upwards of $50 billion to the $41.5 billion it priced its IPO at. Additionally, fintech stocks have been getting hammered lately.
Nu is undoubtedly a very exciting story, given the number of customers it has acquired and its popularity in Latin America. But right now, as I wrote prior to the IPO, a $50 billion-plus valuation seems a bit rich. Given the volatility that Brazilian fintech stocks have traded with, I do feel like there will be opportunities to get in at a lower valuation, although I've been wrong so far.
