Why The IPO Window For Fintech Is 'Essentially Closed' In 2022

Rising interest rates have crushed high-growth tech stock valuations in 2022, and most of the high-profile fintech IPOs of recent years are now trading well off their post-IPO highs. On Wednesday, DataTrek Research co-founder Jessica Rabe said fintech startups are now relying heavily on private financing.

Coinbase Global Inc COIN, SoFi Technologies Inc SOFI and Robinhood Markets Inc HOOD were three of the highest-profile fintech IPOs of 2021. At this point, the three stocks are down 86.5%, 74.2% and 66.9%, respectively, in the past year.

"With high-profile IPOs from last year well below their peaks (i.e. Coinbase, Robinhood and SoFi), the IPO window for fintechs is essentially closed," Rabe said.

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The Numbers: The financial services sector raised $131 billion in venture funding in 2021, more than any other group. While fintech venture capital funding has declined each quarter so far in 2022, Rabe said it remains a popular investment area for VC firms. So far this year, financial services firms have raised $56.2 billion in funding, well above full-year totals in 2020 ($34.2 billion), 2019 ($34.9 billion) and 2018 ($52.6 billion).

In 2022, high-profile fintech companies are no longer choosing to go public to raise capital. For example, the "buy now, pay later" company Klarna raised $800 million in July in a private funding round led by Sequoia, Silver Lake, and Commonwealth Bank of Australia.

"Fintech and financial services startups have been hit by a difficult macroeconomic backdrop just like many other categories, but it continues to stand out as one of VC’s favorite sectors to back," Rabe said.

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Despite the recent valuation hiccup, Rabe said VC investors realize fintech companies still have long-term opportunities to disrupt the traditional financial sector in a similar way that e-commerce companies disrupted the department store industry.

Benzinga's Take: It may be a while before the average retail investor gets a crack at another round of high-profile fintech IPOs now that the 2021 IPO wave has died down. In the meantime, investors can stay up-to-date on the most cutting edge fintech startups by attending the Benzinga Fintech Deal Day event in New York City on Dec. 8.

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