Fintech Firms Suspend IPOs and Lose Valuations amid Economic Downturns 

UTC by Ibukun Ogundare · 3 min read
Fintech Firms Suspend IPOs and Lose Valuations amid Economic Downturns 
Photo: Unsplash

With the rising inflation and interest rate hikes causing the economic downturns, fintech firms are struggling to survive.

The fintech sector is now recording downturns after experiencing a buzzing phase that resulted in increases. During the Money 20/20 Europe trade show, heads of fintech giants mentioned the negative effect of a crumbling macroeconomic climate on funding and valuations. As the economic downturns persist, fintech firms are also suspending plans for their initial public offerings (IPOs). Additionally, the current market condition has sent fears to investors who are panicking against an impending recession.

Stripe co-founder and president John Collison is not sure if the company can still boast of its $95 billion valuation considering the current economic situation. Stripe generated $1 billion in funding in July last year. The financial commitment reinforced the company’s position as the most valuable US company. At the time of the financing, bids from investors were more than $4 billion, but only $1 billion was filled. Participants of the funding round included Capital Group Company, Sequoia Capital, Shopify, and Silver Lake. At the trade show, Collison said that Stripe is currently not looking to raise more funds.

Economic Downturns Affect Fintech Sector

On the other hand, Klarna is seeking fresh funding at a lesser valuation. People familiar with the matter noted that the company expects its valuation to be under the $46 billion market value it achieved months ago after the new investments. Last month, the financial company said it would be laying off 10% of its workforce globally. Klarna blamed the Russia-Ukraine war, inflation, and global stock market volatility as the reasons for the decision.

Meanwhile, financial company Affirm (NASDAQ: AFRM) has lost about two-thirds of its stock market value since the beginning of the year. MarketWatch data shows that the company has dropped nearly 77% in its year-to-date record. The decline is in addition to a 63.36% plunge over the past year. Also, Affirm accounted for a significant miss in revenue guidance during its fiscal Q2 2022 results. The company dipped more than 21% in reaction to the unimpressive result.

As fintech companies continue to bleed amid the downturns, many of them are also putting their IPO plans on hold. British digital bank Zopa which hoped to go public at year-end is now unsure about the plan. The ongoing inflation fueled by the Russian invasion of Ukraine is affecting the public and private markets globally. Meanwhile, Zopa CEO Jaidev Janardana noted that “the markets have to be there “for the financial company’s public debut. He continued:

“We will just have to wait for when the markets are in the right place. You only want to do an IPO once, so we want to make sure that we pick the right moment.”

With the rising inflation and interest rate hikes causing the economic downturns, fintech firms are struggling to survive. OpenPayd CEO Iana Dimitrova said people are being more cautious than they were a year before.

Business News, Editor's Choice, IPO News, Market News, News
Ibukun Ogundare

Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.

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