The once-hot FinTech space is in the midst of a big chill, shedding half a trillion in valuation as the cumulative value of shares of newly-listed firms in the sector dropped $156 billion so far this year.
Initial public offerings (IPOs) escalated in the FinTech space since the pandemic took hold in 2020, but now plans for going public are on hold and valuations are slashed while companies scramble to cut costs.
Mizuho analyst Dan Dolev said that FinTechs in the payments space did especially well during the pandemic since people were homebound and shopping online for everything they needed, Financial Times reported on Monday (July 18).
FinTech OneConnect saw shares drop more than 20%, according to the PYMNTS FinTech IPO Index, which dropped 3% as reported on Friday (July 15). Upstart’s decline was in part due to a downgrade from Goldman Sachs. Year-to-date, PYMNTS Index shows overall performance in the space down close to 43%.
See also: FinTech IPO Index Stumbles Into Earnings Season With 3% Weekly Drop
PayPal and Block combined lost $300 billion in market capitalization this year, and Klarna dropped its valuation from $46 billion to under $7 billion, FT reported. Stripe slashed its valuation by more than 25%.
Read more: IPO Value Plunges 90% in 2022 in US, Europe
The value of IPOs around the world dropped 71%. In the U.S. and Europe, just 157 companies raised $17.9 billion in total in the first five months of 2022, down from 628 companies raising $192 billion in the same period in 2021, PYMNTS reported last month.
Dolev told FT that the second half of 2022 could see a rebound for a lot of companies as year-on-year comparisons look more promising.
Related: Plummeting FinTech IPO Index Carries Warning for Future Startup Funding
PYMNTS’ FinTech IPO Index in May was down 50% year to date, with interest rates rising for borrowers and approval rates declining. Venture capital companies started reeling in funding, looking for break-even points in startups burning through cash.
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