IPO NerdWallet: Should we invest in the personal finance startup?


Wall Street has seen a wave of IPOs by financial services firms this year. Personal finance startup NerdWallet, Inc. last week filed documents with the Securities and Exchange Commission revealing its intention to become a public entity. He is seeking to raise up to $ 100 million from the initial public offering.

Once approved by regulators, NerdWallet will trade on the Nasdaq stock exchange under the ticker symbol NRDS. The underwriters of the offer include Morgan Stanley, Bank of America Securities and Citigroup. The proceeds of the placement will be used primarily to repay debt and for general corporate purposes. However, details such as the number of shares offered and the price of the offer are not yet known.

Unique model

The San Francisco-based company provides advice and recommendations on a range of financial services, including loans, banking, mortgages, insurance, mutual fund investments and credit cards, focusing on focus on retail customers and small and medium-sized businesses.

Read management / analyst comments on quarterly reports

It was founded in 2009 by Jacob Gibson and Tim Chen, who has served as CEO since then. One of the key offerings of the specialist financial services company is the expert rating on credit card services, which allows customers to choose the most appropriate and cost-effective services that meet their specific needs. The unique model has allowed the company to stand out in this segment.

Meanwhile, NerdWallet’s financial performance has been affected to some extent by the pandemic, causing partner business to decline. The partner base includes big names like American Express Company (NYSE: AXP) and Citigroup, Inc. (NYSE: C). Being an emerging field, the regulatory environment for the online financial services market is constantly evolving, creating uncertainty.

Growth plan

Growth initiatives, especially international expansion, can put pressure on the company’s liquidity and would require healthy cash flow. As a prelude to its public debut, the company expanded its portfolio with a few acquisitions last year – UK-based online financial advisory firm Know Your Money and New York-based microcredit firm Fundera.

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Earlier this year, cryptocurrency exchange Coinbase Global Inc. (NASDAQ: COIN), e-commerce brokerage firm Robinhood Markets Inc. (NASDAQ: HOOD) and mobile commerce platform Affirm Holdings Inc. (NASDAQ : AFRM) have gone public thanks to successful IPOs.

FY20 mixed

NerdWallet has steadily expanded its user base in recent years. In fiscal 2020, it generated revenues of $ 245.3 million, up 7% from the prior year period. However, net income declined to $ 5.09 million or $ 0.05 per share, from $ 24.2 million or $ 0.22 per share in 2019, reflecting a 22% increase in operating costs. .

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