Every investor would love the opportunity to get in early on initial public offerings (IPOs). The earlier you buy, the better the chance to gain, at least in theory.
That's not what always happens, especially today, when IPOs are very public indeed and often come with a lot of hype. Part of the problem is that most of an IPO's shares go to institutional investors, especially the investment banks that underwrite the offering.
Retail investors get a chance to buy only after the stock is already on the open market, and with the speed at which stocks trade in the markets in the digital age, prices can run up quickly, making it unaffordable for retail investors to have any real chance at a low price.
The good news, for retail investors at least, is that this model lends itself to price drops. IPO stock Chime Financial (CHYM +2.82%) is a great example.
The IPO market has been quiet lately, and Chime was one of few exciting stocks going public in recent months. It priced its IPO at $27 per share, and the stock opened on the stock market at $43. However, it ended the first day at $35, about where it stands today, a few weeks later.
Is this an opportunity for retail investors? Let's see where Chime could be three years from now.
Equal access in banking
Chime is an all-digital bank targeting lower-income clients with financial products to make their lives easier. It grew out of a desire to fill a gap in the banking system, which it says isn't favorable to the two-thirds of Americans who are living paycheck to paycheck. Since this population isn't filling their bank accounts with lucrative deposits, the traditional banking system charges them fees in order to make a profit from them.
Image source: Getty Images.
With today's abundant technology, Chime's founders set out to create an agile and low-cost bank with a different money-making model that relies on interchange fees from credit card payments. Instead of investing in creating its own bank, it has partnerships with two banks that give the company a small cut for the deposits they get from it.
Today, Chime offers a small but growing set of services, including savings accounts and credit cards, and it has 8.6 million customers. Of the 75% of transactions per customer in the first quarter, 70% were for nondiscretionary purchases, and 67% of account holders use Chime as their primary bank account.
The target population is finding value with Chime. According to a 2024 internal company survey, more people making less than $100,000 annually switched to the company or opened with it for direct deposit more than any other bank, and 75% of Chime members say they will be members for life. They have 3.3 products on average, indicating that members are enjoying being in the ecosystem.
Expanding access and its market
Right now, management sees an $86 billion opportunity in serving the 196 million Americans who make less than $100,000 annually, of which it has a 3% share. However, it sees potential to expand its platform and its audience and envisions a market opportunity of $426 billion.
NASDAQ: CHYM
Key Data Points
It's still getting started, which is why it could be attractive for investors. Revenue increased 24% year over year in the 2025 first quarter to $519 million, and gross margin remained at 88%. It reported positive net income in the first quarter in 2024 and 2025, but it has yet to report an annual net profit.
New stocks are generally risky, but it looks like Chime has a strong and innovative business model as well as the loyalty of its members. Three years from now, the company is likely to be a lot larger, with more customers and products.
Taking that 24% figure as a potential compound annual growth rate during the next three years, it would have about $3.2 billion in revenue, or close to double today's figure. It could be profitable, and if it is, the market might give it a higher valuation, increasing the chance of significant stock gains.
