Nubank’s upcoming blockbuster IPO 🤯; The first-ever token 'merger' deal 😲; Marqeta’s first-ever earnings 🚀

Good Morning FinTech. 23/30

Good morning Everyone,

And happy Monday! Hope you had some time to relax over the weekend and Monday isn’t that tough… Here’s a mix of 3 stories to kick off your week:

Nubank’s upcoming blockbuster IPO 🤯

The news 👀 Brazilian neobank and FinTech giant Nubank is readying an initial public offering (IPO) greater than $2 billion by year’s end, according to reports from Bloomberg.

It must be noted though that this is not the first time the Latin American FinTech company has reportedly considered an IPO. Back in April, the bank was discussing going public on the U.S. stock market and had been consulting with advisers in New York. Yet, this time it might actually materialize.

Valuation momentum 🚀 One of the largest drivers in Nubank’s upward funding momentum is Berkshire Hathaway, a Nebraska-based real estate company owned by philanthropist and business mogul Warren Buffett. Berkshire Hathaway alone has contributed a $500 million investment, driving the bank’s funding in 2021 alone to $1.15 billion. Altogether, Nubank has generated $2 billion in venture capital.

Nubank is now reportedly being valued at $30 billion.

The IPO 🔔 The neobank may be purportedly going after a valuation exceeding $40 billion, but this number is not final since negotiations are still ongoing. This would make the company the second most valuable financial institution in Latin America, right after Brazil’s Itau Unibanco Holding SA (NYSE: ITUB).

✈️ THE TAKEAWAY

The time has probably come ⏰ Founded in 2013, Nubank began with just a credit card offering, building trust with customers without requiring them to put out any upfront money, as would be the case with a debit card. Fast forward to 2021, Nubank now counts more than 40M customers globally making it the biggest neobank on the planet. Furthermore, it must be remembered that earlier this year, Nubank has acquired Brasilian digital investment firm Easynvest — which manages over $5B in assets for over 1.6M clients. Since then, the bank started offering its customers exposure to Bitcoin through Easynvest's QR Bitcoin ETF (QBTC11), and its website has a dedicated section with information about cryptocurrency and NFT trends. Add it all together, and Nubank looks like a perfect fit for Wall Street. The LatAm FinTech giant, if to go public, will be one of the most interesting IPOs this year.

The first-ever token 'merger' deal 😲

The deal 🤝 Ethereum scaling project Polygon (formerly Matic Network) has acquired Hermez Network — a ZK-Rollups-based Ethereum scaling solution — for $250M. The two blockchain projects are also merging their native tokens — MATIC and HEZ — in the first-ever such deal in the crypto space.

Polygon said Hermez’s offerings will be merged into Polygon with the new name “Polygon Hermez.” As part of the deal, Hermez’s 26 members of staff are also joining Polygon's team of 80.

A similar deal in the past 🔙 Earlier this year, two Ethereum projects, Keep and NuCypher, also merged their protocols, but they kept their brands independent of each other and did not merge their tokens.

✈️ THE TAKEAWAY

Building future on Ethereum. As noted by both companies, this merger should accomplish their shared objective to create a more inclusive financial system that is secure, decentralized, and permissionless, on top of Ethereum. Polygon’s commitment to ZK-based solutions might be one of the most interesting developments in the crypto space right now. ZK-Rollups are a type of scaling technology that helps bundle transactions onto a network, e.g. Hermez in this case, and publish their validity proof on Ethereum. This effectively reduces the load on the Ethereum blockchain because transactions are executed outside the mainnet, and it makes for cheaper transactions. Does the future belong to Ethereum? 🤔

Marqeta’s first-ever earnings 🚀

Earnings call 📲 API issuer-processor Marqeta reported $26.5B in total processing volume (TPV) in Q2, up 76% year over year (YoY)—notching in one quarter almost half the $60 billion in TPV it took in last year. Not too shabby!

The USP 🥊 Marqeta offers companies open APIs that they can plug into their platforms to issue digital cards, authorize transactions, and prevent fraud. It operates in 36 countries, and some of its biggest clients include Square, Affirm, and Instacart.

Usage & Transactions 💸 In the company’s Q2 earnings call, CFO Tripp Faix described Marqeta as a usage- and transaction-based company—meaning its revenues depend heavily on how well clients’ Marqeta-powered products perform. Here are three areas Faix said contributed to Marqeta’s elevated Q2 TPV:

• Digital banking: The firm powers the virtual credit cards used by JPMorgan Chase’s retail customers and also recently began issuing virtual debit cards for Goldman Sachs’ Marcus checking account users.

• Buy now, pay later (BNPL): Marqeta supports some of the biggest players in the industry, including Klarna, Afterpay, and Affirm, enabling in-app and in-store card transactions. The company said its BNPL clients saw 350% YoY net revenue growth in Q2.

• On-demand delivery: Although this vertical’s growth was down compared with previous quarters—likely a result of increased in-person dining—it still represented a large portion of Marqeta’s business, and any dip was offset by increased digital banking and BNPL business.

✈️ THE TAKEAWAY

Something that should worry… At least a bit. The company’s S-1 filing revealed that 70% of its net revenues in 2020 came from Square, and it likely remains a huge driver of Marqeta’s business. This simply means any decline in or loss of Square’s business could have serious ramifications for Marqeta. Yet, considering Square’s recent performance, a business contraction is unlikely in the foreseeable future. On the other hand, Marqeta’s dependency on Square underscores the need to diversify its clients, which is something it’s working on right now. Recent partnerships with Google and continued work with Affirm are some of the first steps the firm has taken in order to strengthen its portfolio diversification.

🔎 What else I’m watching

• The rebrand 😎 Western Union Business Solutions (WUBS) is slated to be acquired by Goldfinch Partners and The Baupost Group in a $910M deal that will rename the business Convera, according to a press release. The WUBS spinoff Convera specializes in business-to-business (B2B) cross-border payments and foreign exchange solutions. A new FinTech in town? 🤔

• The settlement 😬 BitMEX, a virtual currency derivatives exchange, has agreed to pay up to $100M to settle US charges of unlawfully accepting customer funds to trade cryptocurrencies. The exchange was not registered to accept these funds, and it also failed to conduct customer due diligence, according to the press release. The US Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN) unit of the US Treasury Department alleged that for six years, BitMEX sold cryptocurrency derivatives to US customers without properly registering with US authorities.

💸 Following the Money

• The leading Latin American venture firm Kaszek makes its first DeFi investment. The fund led a $3M investment in Exactly, a startup building a decentralized credit protocol.

• U.S. Bank has agreed to purchase FinTech company Bento Technologies. The acquisition is aimed at broadening the bank’s digital capabilities for small business customers. The terms of the deal were not disclosed.

👋 That’s it for today! Thank you for reading and have a productive Monday! And if you enjoyed this newsletter, invite your friends and colleagues to sign up:

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