Skip to content

News

Fintech valuations fall by half a trillion

Facebook
Twitter
LinkedIn

Nearly half a trillion dollars has been wiped off the valuation of fintech firms so far this year when their current value is compared to their peak valuation, according to CB Insights.

The onset of the pandemic and a massive increase in the use of digital services led to a record number of IPOs among fintechs back in 2020, especially in the US. CB Insights data shows that 30 fintechs have listed in the US since 2020.

However, the notion that the pandemic would accelerate the migration to digital financial services has been challenged by the macro-economic events that has seen inflation increase at a global level, raising interest rates as a result.

This has also led more investors to question the untested business models and lack of profits at some fintechs, consequently cooling the investor sentiment around the sector.

Analysis from the Financial Times has shown that the share price of listed fintechs has dripped by 50% so far this year, almost twice as much as the drop in conventional markets – the Nasdaq Composite has fallen by 29% during the same period.

In addition, the cumulative market capitalisation for fintechs has fallen by $156bn in 2022. And if each listed fintechs was to have its current stock valued in comparison to its all-time high, around $460bn would have been lost.

The FT quoted Dan Dolev, analyst at Mizuho, who said fintechs and digital payments firms in particular were the first part of the tech sector to benefit from the pandemic with people stuck at home and buying things online. “Now they are overcorrecting to the downside ahead of other sectors too,” he said.

However, Dolev also said that he expects a rebound from many fintechs in the second half of the year.

Nor have the valuation issues been restricted to listed fintechs. Privately-funded payments firm Stripe has slashed its valuation by 28% in recent days.

 

Source: Finextra

Facebook
Twitter
LinkedIn

Related Posts

AI

FCA to launch live AI testing service

The Financial Conduct Authority (FCA) is set to launch an innovative live AI testing service aimed at helping firms deploy safe and responsible artificial intelligence (AI) solutions. This move is
Read More >

Guidance on the failure to prevent fraud offence

The Serious Fraud Office (SFO) has released updated guidance encouraging companies to promptly self-report suspected fraud or misconduct. This new initiative aims to help businesses avoid criminal prosecution and mitigate
Read More >