Nubank shares complete a year on the Stock Exchange with a drop of almost 60%

Having recently completed one year of listing on the New York Stock Exchange (NYSE), Nubank sees its shares sink by around 60% after its debut in December 2021.

Since the IPO, on December 8, when the shares were valued at US$ 9 (R$ 48.06), the drop is approximately 56.7% —the shares closed at Friday (16) quoted at US$ 3.90 (R$ 20.59).

External factors unrelated to fintech, as well as challenges inherent to the business to monetize the operation, contributed to the strong devaluation of the paper over the last 12 months.

In the broader macroeconomic scenario, the beginning of the process of raising interest rates in the United States to combat inflationary pressure in the country was a factor that weighed significantly on the performance not only of Nubank but also of the large American technology companies.

With the expectation of an outstanding growth in operations in the future, technology companies end up suffering more than the market average in scenarios of rising interest rates, as investors start to review the projections for the profits of these businesses when considering a higher discount rate for future years.

“The fall in Nubank’s shares was accompanied by promises of growth, the market soon realized that the company would have difficulty executing, simply because there was no visibility of interest rates starting to fall”, says Danielle Lopes, partner and equity analyst from Nord Research.

On Wednesday (14), the Federal Reserve (Fed, central bank of the United States) raised the American interest rate for the seventh consecutive time, which has fueled the expectation in the market that the process of monetary tightening could culminate in a global economic recession in 2023.

The Nord analyst adds that the probability of the Selic rate remaining high for longer than expected until a few weeks ago, in the wake of discussions on the conduct of fiscal policy from next year, also has a negative impact on the operation. of Nubank, with a reduction in the granting of credit and an increase in defaults.

In this environment, fintechs in general, which in the period of historically low interest rates in recent years managed to raise funds in abundance from the pockets of financial agents, saw the faucet turn off.

In addition to being forced to increase efforts to start monetizing operations as soon as possible to deliver returns to investors, new digital companies have had to review their size, with a series of layoffs over the last few months.

Nubank was unable to escape this trend, having made employee layoffs in recent weeks, as well as market peers, such as XP Investimentos and TC platforms.

“Nubank, like many companies, regularly assesses the size of its internal teams, in order to make adjustments according to business needs.

In addition to adjusting the staff to the new reality, fintech has adopted measures to increase the monetization of the base, which has around 70 million customers and which represents one of the main challenges pointed out by market analysts to make the operation sustainable.

One of the main initiatives in this regard so far came in July, when the company announced that the balance of new deposits in the Nubank account will automatically yield 100% of the CDI only 30 days after the money is received, with retroactive payment.

At an event in early December, the president of Itaú Unibanco, Milton Maluhy Filho, said that, in the new era of interest rates closer to historical averages, fintechs are increasingly looking for ways to monetize their businesses.

“Several of them are changing their business models. What used to be a remuneration for a 100% CDI account, now you no longer remunerate it if the client turns over the resource before 30 days, which happens in the vast majority of cases”, he said. the executive, in apparent reference to the measure announced by Nubank.

At the IPO in the United States in December 2021, Nubank surpassed Itaú and held for a few days the post of financial institution with the highest market value in Latin America.

With the drop in shares since then, Nubank currently has a market value of approximately US$ 18.2 billion (R$ 96.1 billion), against Itaú’s US$ 40.7 billion (R$ 215 billion).

Head of analysis and partner at Levante Investimentos, Enrico Cozzolino says that he considered the price level of Nubank’s shares quite exaggerated at the time of the IPO, considering that the company was evaluated much more as a technology business under the eyes of investors than as a bank.

With the sharp adjustment that has taken place since then, Cozzolino says he sees Nubank’s shares being traded at levels that much more adequately reflect the value and potential of the company.

The issue now, adds the Levante partner, is that, although the share price is closer to the level considered fair, the macroeconomic scenario in a broader sense, with high interest rates and family indebtedness, is today much more uncertain than it used to be one year, which recommends greater caution with investing in fintech shares.

Delisting in Brazil and millionaire bonus to the CEO generated noise among investors

Since it opted to become a publicly traded company, Nubank has also found itself in the spotlight due to decisions that were not very well received by analysts.

Among them, with the announcement in September that it would cease to be a publicly traded company in Brazil, continuing to be listed only on the New York Stock Exchange.

The company stated that the proposal aims to “maximize efficiency and minimize consequential redundancies of a public company in more than one jurisdiction”.

In the opinion of Itaú BBA analysts, the measure is negative for the company’s governance and for minority investors as it reduces the level of transparency.

“In practice, we believe that information disclosure may be poorer, and even less comparable with local financial institutions,” said the bank’s analysts at the time.

The news in April had already caused some discomfort in the market regarding a remuneration agreement according to which the board could receive an amount in excess of R$ 800 million in the coming years, depending on the achievement of certain goals, and most of the amount would go to the company’s CEO, David Vélez.

At the end of November, fintech reported that the board chose to end the agreement that provided for the millionaire remuneration.

“Nu reported a net income of US$ 7.8 million (R$ 41.6 million) in the third quarter, representing break even [ponto de equilíbrio entre despesas e receitas] from the holding. Although we have an increase in defaults in the [terceiro] quarter, consistent with market trends, our risk-adjusted margins increased by 100 basis points, which shows that we are managing to price risk correctly. Nu is well capitalized and ready to generate long-term growth at scale,” David Vélez said in a note.