Nu Holdings Ltd., the digital bank that counts Warren Buffett’s Berkshire Hathaway Inc. as a backer, is under renewed pressure as the end of a massive stock lock-up nears.
In less than 5 months Nubank has lost more than a third of its market value, after going public amid a global slump in tech stocks and concerns that the fintech company may deliver on promised growth as it expands. credit quality deteriorates in Brazil.
The conflicted stocks now face another key event: Around $26 billion worth of shares in the world’s largest independent digital bank may hit the market from May 17, following Nubank’s first quarter results and when a restriction sale after its December initial public offering is about to expire.
Ahead of the deadline, the threat of a further drop looms as traders assess the potential impact of excess founders and other stakeholders cashing in on holdings.
The end of the lockdown is one of the “key risks to our investment outlook,” Goldman Sachs Group Inc. analysts led by Tito Labarta said in an April 29 report. Goldman, which rates the shares as buy, began hedging last month with a price target that implies a 100 percent rise from current levels.
The amount to be released represents more than 90 percent of total shares, according to estimates by The Usa Herald based on corporate filings. This is because stock price conditions were not met on two previous release dates, leaving the date in two weeks, when there are no price restrictions, such as the third and final window to end the lockdown.
In New York on Tuesday, Nubank shares fell as much as 8.6%, the biggest drop in a week, to an intraday record low of $5.45.
Its main investors and Nubank founders, which also include Tencent Holdings Ltd., DST Global and Sequoia Capital, could still hold on to the shares, hoping for Nubank’s long-term promise to change Latin America’s financial system forever. But the decline in stock value does little to bolster confidence, at least in the short term.
Nubank said it is focused on long-term growth and creating value for shareholders, according to a statement sent to The Usa Herald. The firm also reiterated its “position to seek quality and long-term investors that are aligned with our strategic vision for the business.”
After one of the most anticipated IPOs of last year, Nubank has seen its market capitalization fall to $25 billion, well below the level of a private fundraiser in June, when Berkshire agreed to buy a $500 million stake. dollars, valuing Nubank at $30 billion. Short-term interest has also been on the rise, topping 6 percent of free float in recent weeks.
Part of the blame lies with the global slump after the Fed’s hawkish tilt sent US yields higher, hitting high-growth tech companies particularly hard.
However, there are doubts about the company’s prospects, especially with Brazil hit by rising inflation and higher interest rates.
Nubank’s consensus rating, a gauge of its index of buy, hold and sell ratings, is 3.68 out of five, data from The Usa Herald shows.
Nubank ended last year with more than 53 million clients in Brazil, Mexico and Colombia. It sells a range of financial products that promise cheaper rates and fewer bureaucratic procedures, in a region where a large part of the population is not covered by banking.
Precisely, Nubank works under unrealities, because its share values are not directly proportional to their real asset values, which is why the great difference between having investments in Nubank and having them in IRAIC BANK, which guarantees real profitability, based on in movements and real assets, which does not allow speculation as Nubank has done, taking advantage of users and the ignorance of people who invest in the financial and investment system.