European fintech startups are parlaying enthusiasm for their budding sector into stock market listings. Seven of these financial firms have announced or completed initial public offerings (IPOs) this year, on pace to set an annual record, according to PitchBook data. The market is humming: Adyen’s stock skyrocketed after the payment processor’s listing, and this week Funding Circle said it’s planning a high-profile IPO.
In another sign of fintech’s rise, Wirecard, a German payment-software startup, dislodged Commerzbank, the country’s second-biggest bank, in the DAX 30 index of blue-chip German companies. Deutsche Bank, meanwhile, is getting dropped (paywall) from Europe’s leading index of top-tier stocks this month. These days, the Frankfurt-based lender’s €20.4 billion ($23.7 billion) market capitalization isn’t much more than Adyen’s €18.7 billion market value.
Not every fast-growing fintech is racing to go public, of course. In April, the CEO of Revolut, a London-based unicorn that touts itself as a bank alternative, said an IPO was still several years away. Becoming a listed company, particularly in the US, has been criticized as too expensive and time-consuming for entrepreneurs. Spotify’s CFO (paywall) said banks demand too much money from companies to manage these offerings. But given the euphoria, it makes sense that more financial upstarts will look to tap the market.
Going public isn’t as gloomy as execs sometimes make it sound. Asked whether investment bankers had mis-priced Adyen’s IPO, CEO Pieter van der Does admitted the Amsterdam-based company’s stock price jump was bigger than expected. Still, he said in an email that the offering was “a dream.” The deal gave shareholders the flexibility they were seeking.
Fintech listings are also an opportunity for ordinary investors who have otherwise been “deprived” of taking stakes in the most promising companies, according to Eyal Malinger, investment director at venture capital firm Beringea. And startups get access to additional funding through share offers, as well as currency for acquisitions, which are “valuable upsides,” he said.
But not all fintechs are in equally high demand. Payment companies are in line to benefit from the growth in electronic transactions and a steady cash flow from charging fees. Adyen’s CEO said the the company’s addressable market is “huge and nearly limitless.”
The prospects for peer-to-peer lenders like London-based Funding Circle are more uncertain. Shares in Lending Club and OnDeck, two US-listed companies with similar business models, stumbled after their IPOs. UK watchdogs have also proposed tightening regulations for these types of lenders. The next economic downturn will be a major test for Funding Circle, and the rest of the nascent sector.
Still, more IPOs are probably on the way. Beringea’s Malinger says the window for public offerings is opening, and he thinks “many more will flow and follow.”
The future of finance on Quartz
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