Chime is expected to have an IPO in the second half of 2022 (probably later), and the most recent valuations put it at around $40 billion (but it’s most likely less now).
Chime is an online bank that is based in San Francisco and was created in 2013. The company’s app allows users to open checking and savings accounts and offers debit cards with Visa branding. Instead of charging clients fees for accounts, Chime makes money by taking a portion of the transaction fees that Visa charges its merchants when customers use their Chime debit cards. Chime allows customers to receive their direct deposit pay cheques two days early, and it has two savings features. One rounds up purchases to the nearest dollar (similar to Acorn and others) with the round-up amount being put in their savings account. And the other takes a percentage of any direct deposit and automatically deposits those into the savings account. Their High-Yield Savings Account gives customers 0.50% APY, which is much higher than the traditional banking national average of just 0.07% APY. Chime also provides fee-free overdraft protections to those that have direct deposits. When compared to the exorbitant fees traditional banks charge, this service offering has been especially attractive to lower and middle-income Americans, resulting in millions of customers choosing to do their banking with Chime.
Chime’s planned March 2022 IPO
In August 2021, the company had its most recent round of funding and raised $1.1 billion, selling about 4.5% of its shares and giving it a $25 billion valuation. After this funding round was complete in the Fall of 2021, Forbes and other outlets reported that Chime was targeting a March 2022 date to go public. They reportedly brought on Goldman Sachs to lead the IPO, and the desired valuation numbers that had been thrown around at the time were between $35 and 45 billion; splitting the difference, we estimated the value for the IPO at around $40 billion.
The fall of Fintech and postponement
Fintech has taken a beating lately. Since October 2021, the Global X FinTech ETF FNTX, an ETF that
It follows the Fintech space, has lost 55% of its value, dropping from $52.83 to its current $23.71. PayPal is down nearly 75% from its July 2021 high of $308, and Block, the maker of Square, is down almost 70% from its August 2021 high of $281.
With this industry-wide decrease, Forbes reported in February that Chime would be postponing its IPO until 2022’s second half and probably until the fourth quarter or beyond. At that point (February 18th), the industry ETF was down to $30.99; it has since fallen another 24%.
While non-traditional fintech banks expanded quickly last year, their growth slowed compared to 2020, when they saw considerable gains mainly due to the COVID-19 pandemic. A Chime insider reported that in 2021 the company saw revenue reach nearly $1 billion. If this is true, it is over 50% more than 2020 and more than triple the reported $200 million revenue of 2019.
With the industry slowing, the market is demanding more; some investors who bet on both private and public companies are beginning to demand lower startup valuations. This demand, combined with the stock selling seen in 2022, has cooled the IPO market, which had a record number of fintech IPOs in 2021.
Chime’s eventual IPO
It may be awhile before we see a Chime IPO. They obviously want to go public eventually with their statements of intention over the past 18 months. Though the $40 billion valuation is the most recent, because of the change in the market and the demands that investors are making, this valuation is out the window for the time being. If they were to go public now, $20-25 billion would be more likely, and they would then be heading into a possible recession, which is likely why their current investors would rather not move forward with a public offering. They are better off building their client base and expanding into new product lines for that growing number of clients. The more revenue and profit they can eventually show, the more substantial their position will be. Until then, we will diligently monitor the news for a Chime IPO.
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