FinTech IPO Index Plummets 13%, Worst Weekly Showing This Year

Perhaps the best thing that could be said about this terrible, no good, lousy week is that … it could’ve been worse.

The 13.5% slide in the FinTech IPO Tracker for the week comes, of course, in the same week that the Fed hiked interest rates, and in the same week that retail sales fell and in the same week where employment numbers were worse than expected.

But in our corner of the FinTech universe, amid the payments and platform firms, well, those stocks — to use a Wall Street term — fell out of bed. The bloodbath seemed indiscriminate, taking down firms that had news to report, and those that had no headlines.

A number of companies’ stocks fell by more than 20%. Among those names: Opendoor’s shares were down by about 29%, as were shares in Robinhood, while Hippo Insurance slid 24%.

FinTech IPO Index Performance YTD

As noted in this space, Robinhood showed $6.19 billion of cash and cash equivalents at the end of the first quarter on May 31. Since its initial public offering (IPO) last July, Robinhood’s losses topped $3 billion. The company has seen a number of downgrades on Wall Street over stock market and crypto market volatility.

Shares of Upstart were 19% lower. As we reported last week, the Consumer Financial Protection Bureau (CFPB) issued an order to terminate Upstart Network from its list of approved “no action letters” (NALs). The NALs provided a special regulatory treatment to Upstart by immunizing the lender from being charged with fair lending law violations with respect to its underwriting algorithm, while the NAL remained in force.

Read also: Upstart’s Request to End Regulatory Immunity Raises Question on CFPB’s Tool

Payoneer sank 19%, too, having reported earlier in the month that it was teaming with Fiserv on cross-border payments. Businesses can now access Payoneer’s payouts platform through the Carat operating system from Fiserv, reducing the accompanying costs of global payouts.

Any News Is Bad News

We think you get the picture here: No news is bad news, any news is bad news … and investors have been painting these companies’ stocks with an indiscriminate brush of negativity.

But then again, what lies ahead is no smooth road to profits, no smooth road to top line growth. For many of these FinTech upstarts that have gone public over the past few years (even ahead of the pandemic), the economy was booming, and transaction surges seemed inevitable.

But no one knows — with the rather limited operating history in place with the vast majority of these companies — what happens in a recession. No one quite knows what happens when transaction volumes slow. Or when the housing market crumbles enough to (truly) dent the platform models that match, say, home buyers and home sellers. The inflationary environment remains a wild card, and is running hotter than most people expected. The fact that the Index is down just about 42% YTD speaks volumes to the worries and concerns that are mounting.

Young companies populate our FinTech IPO landscape — but they’re getting a lot of experience, all at once, and perhaps in ways no one would have wanted.