It has been a tumultuous year for the markets, for the myriad of crypto companies and online platforms, some of them global in scope, and heading into the new year, the questions around valuation seem urgent.
Are those nascent, digital-only tech companies pushing themselves at sparkling levels? Devalued? Or just okay?
At the time of this writing, the high-tech NASDAQ, a general indicator of new economy businesses, is up about 20% so far this year. The S&P, a more general benchmark, is up 26%.
Dig a little deeper, and success depends on where you look. It's no secret that the interest in bringing in FinTechs, online trading platforms, payment companies, and crypto vehicles has been a mainstay of IPO and SPAC-related activity. As demonstrated in PYMNTS's own tracking of listings, banking-focused ads to date came in at 66, followed only by companies that aim to disrupt and change the ways companies do business.
Read more: Platform companies dominate year-end IPO and SPAC activity
Funding rounds and public debuts
The funding rounds and public debuts highlight the fact that venture capitalists view the great digital shift as a sustained and sustainable narrative deserving huge amounts of capital, which will then ostensibly manifest itself in public markets.
But no matter how well-known the companies are, no high tide has lifted all ships.
In the past few days, we've gotten a reminder of that: Robinhood, the online trading platform, recently saw its shares change hands at $ 18.65, a significant drop from its July IPO of around 38 dollars. Cryptocurrency platform Coinbase initially hit the market in the spring with a "reference" price of around $ 250. But that company's first trade, out of the gate, was around $ 381, and now the shares are trading at around $ 250.
Regarding the valuation, as an example, Coinbase, according to Yahoo! Finance, trades at about 35 times EPS estimates going forward (versus, say, 29 times for the NASDAQ as a whole). Crypto firms have models tied in part to a derivative: the value of the cryptos themselves, where volatility spurs trading (and bullish trends in prices spur FOMO).
Private markets have also been optimistic. Once again, there are a number of funding rounds with valuations that imply strong growth expectations, especially for digital payments. In one example, payment gateway platform Razorpay has raised $ 375 million in a funding round, which it will use to invest in the neobank platform, make more acquisitions, and enter more markets, which in turn gives it a valuation of $ 7.5 billion. As reported, the round was led by TCV, Lone Pine Capital and Alkeon Capital.
More details: Razorpay raises $ 375 million for expansion and acquisitions
Elsewhere, the Brazilian valuation of FinTech Nubank is up to $ 41.5 billion, higher than that of the country's largest bank, Itaรบ Unibanco, as the company raised $ 2.6 billion.
See also: Nubank goes public with a valuation of $ 41.5 billion with the growth of LatAm in Horizon
But there may be a disconnect between public and private market valuations, with December as a month that started with nearly half of the billion dollar quotes trading below their listing prices, which is over 27% of. companies that were "blown up" to IPOs in 2020. That could be a yardstick that gives at least an indication of valuation concerns ahead in the new year.
Related news: 49% of 2021 high-profile IPOs are trading below list price
