What happened
Shares of the Brazilian banking fintech Nu Holdings (NU 2.36%) had fallen nearly 9% as of 2:10 p.m. for no obvious reason, although the stock has had some volatility since going public last week.
So what
Nu Holdings, the parent company of Nubank, is a digital platform that has disrupted the Brazilian banking market and is picking up steam in other parts of Latin America.
It offers a credit card with no annual fee, as well as other consumer banking services such as cash management accounts, personal loans, online investing, payments capabilities, and more. Nubank also serves business customers. The company has garnered an impressive 48 million customers with low customer acquisition costs, since it offers cheaper banking services that are easier to access than those of other traditional banks in Brazil.
Earlier this year, Warren Buffett and Berkshire Hathaway (BRK.A -0.44%) (BRK.B -0.30%) joined an impressive list of investors and venture capitalists and invested $500 million at a $30 billion valuation. Berkshire also purchased another $250 million worth of shares during the initial public offering (IPO).
Image source: Getty Images.
Now what
I've been incredibly impressed with the strength in Nubank through the first three days of trading. The company cut its IPO valuation just days before trading to $41.5 billion, suggesting that its desired $50 billion valuation might be too high. But even after the decline today, Nubank has a nearly $49 billion market cap, and other fintech stocks have been really struggling in the past few weeks.
As I've mentioned previously, I think Nubank is going to be successful, but it seems like the valuation has simply run up too quickly. There could be opportunities to enter Nubank at a lower valuation, but on a much more long-term horizon, I'm bullish on the company.
