While there\u2019s no shortage of financial technology startups, few have been brave enough to enter the public market here in the US. That\u2019s likely to change in the next 12 to 18 months.<\/p>\n
There are now close to 30 private fintech startups with valuations at or above $1 billion, according to data platform PitchBook. A few of them are increasingly cited as possible IPO candidates.<\/p>\n
Among the most closely watched are Pimco-backed GreenSky, which has already filed paperwork with the Securities and Exchange Commission, and Dutch payments company Adyen BV, said to be considering IPO as soon as this year.<\/p>\n
The question now is what happens to those billion-dollar-plus valuations when the public gets a look at the companies\u2019 financials and growth projections. In the past, fintech companies haven\u2019t fared too well.<\/p>\n
Square Inc, which is set to report earnings this week, is the exception.<\/p>\n
Yet even Jack Dorsey\u2019s payments company endured a slew of negative headlines when it first filed to go public in 2015. After raising funding in the private market at a $6 billion valuation, Square went public at a share price that valued it at $3.66 billion.<\/p>\n
Since then, however, the firm has bounced back, with shares rising more than 425%, reaching a market cap close to $20 billion today.<\/p>\n
Other companies, like LendingClub Corp and On Deck Capital Inc, have been hit particularly hard since their IPOs, with shares falling 82% and 73%, respectively.<\/p>\n
Based on where some funding rounds have priced fintech companies, the trend of lower valuations in the public markets seems likely to continue.<\/p>\n
According to New York-based venture capital fund FinTech Collective, large fintech IPO rounds typically price in the range of 8 to 16 times enterprise value as a multiple of revenue, a frequently-cited industry metric.<\/p>\n
Square, for example, is at the low-end of that range, with a multiple of 8.3.<\/p>\n
But that\u2019s still far richer than most established companies.<\/p>\n
\u201cThese IPO valuations remain at a substantial premium to more mature, publicly traded fintech comparables and legacy financial services players,\u201d the firm wrote in a recent newsletter to clients, \u201cleaving them susceptible to a steep fall if macro conditions falter.\u201d<\/p>\n
Of course, a share price tumble for fintech\u2019s new public market entrants this year is by no means guaranteed\u2014but heightened investor scrutiny is.<\/p>\n