Wishing a very happy Lunar New Year to our readers.
This week, we look at the rising importance of crypto – Bitcoin-Ethereum now exceeds the top 5 US banks by combined market cap.
Also, is the market starting to come back to earth for fintechs? Affirm’s stock trading tumbled after strong results; Loan Depot drops its IPO price.
Not yet, perhaps, with Klarna’s rumored $30 Bn private valuation and MoneyLion’s SPAC announcement.
Let’s get to it.
Early Signs of Improvement; GDP Expected to Increase Under Stimulus
Unemployment claims have dropped to 793,000, which is much lower than the 900,000 peak in early January. An improving job market, coupled with President Biden’s $1.9 Tn stimulus plan, could bring out the strongest economic growth since 1984.
According to the forecast of 76 economists, GDP is projected to increase to an annualized 5.6% in Q2 2021 and 6.2% in Q3, which is 1.6% more than January’s estimates.
BTC – ETH Bigger Than the Top 5 US Banks Combined
BTC-ETH is now bigger than:
a) the top five US banks combined
b) the top five Chinese banks combined
c) the top 10 banks of the rest of the world combined; and,
d) all public companies except for Microsoft, Apple, Google, Amazon, and Saudi Aramco
PayPal’s Crypto Bets: CBDC Distributor, Smart Contracts, Tokenization
On its investor day last Thursday, PayPal CEO Dan Schulman revealed the company’s plans to serve as a Central Bank Digital Currency (CBDC) distributor. PayPal’s digital wallets could become the means by which central banks distribute CBDCs to consumers across income levels.
PayPal also revealed that the company is looking into smart contracts and the tokenization of other non-crypto assets.
Mastercard Jumps onto the Crypto Bandwagon
Mastercard has announced that it is planning to support digital assets in its network this year. Mastercard is addressing the crypto trend by providing additional choice to consumers who are using cards to purchase crypto assets and using crypto cards to convert their digital assets into traditional currencies for spending.
The company specifically stated that it will only support cryptocurrencies that offer significant consumer protections and compliance protocols on its network.
Is the Market Starting to Cool Off for FinTechs?
The trading down of Affirm (on their earnings) and the pricing down of LoanDepot may indicate a cooling market. SoFi SPAC (IPOE) is also trading ~7% off its highs.
Affirm Trades Lower, Even After Strong Results
Affirm posted its first quarter results as a publicly listed company on Thursday; its sales and earnings beat analysts’ estimates, but revenue and volume is forecasted to slowdown in the next quarter. The stock tumbled ~9% post the release.
LoanDepot Prices IPO Significantly Lower
We had covered LoanDepot’s upcoming IPO last week. This week, the company priced its IPO significantly lower from $21 per share to $14 per share. Possible investor concerns include: current low-interest rate environment and potential declining mortgage market / rising interest rate expectations due to the size of expected COVID stimulus package.
Market Rumor: Klarna’s Possible $30 Bn Valuation
Klarna, led by CEO Sebastian Siemiatowski, is allegedly closing a $500 MM funding round. The rumored funding could bring the buy now, pay later company’s valuation anywhere between $25 – $35 Bn. If the rumors are true, Klarna would be the second European fintech to have tripled its valuation next to Cross River’s payment processing partner, Checkout.com.
With the speculated funding round, Klarna would have raised $1.3 Bn in the past year alone.
MoneyLion Goes Public Via SPAC
MoneyLion, led by CEO Dee Choubey, will make its public debut via SPAC by merging with Fusion Acquisition Corp. The post-transaction enterprise value for the merger is estimated at $2.4 Bn with an estimated equity value of $2.9 Bn. The challenger bank will receive a contribution of up to $526 MM in cash proceeds from the transaction.
Proceeds will consist of up to $350 MM of cash held in Fusion Acquisition Corp’s trust account and another $250 MM from private investments led by BlackRock and Apollo Global Management, Inc. at $10.00 per share.
OppFi to Make its Public Debut Via SPAC
OppFi, led by CEO Jared Kaplan, has announced that it will go public via SPAC. The AI-enabled fintech platform will be merging with FG New America Acquisition, which is led by former TD Ameritrade CEO Joe Moglia. The transaction is expected to close by the end of Q2 2021 and the merged company will trade on the NYSE under the ticker symbol “OPFI”.
OppFi enables banks to offer optimized financial products to their consumers. According to the press release, OppFi has originated over 1.5 MM loans, totaling $2.3 Bn since inception.
In the News:
- Winter Layoffs Show Early Signs of Easing (WSJ, 2/11/2021) Unemployment claims have dropped to 793,000 for the week of February 5, which are early signs of improvement in the labor market.
- Larger Stimulus Leads to Big Upgrade to U.S. Growth Forecasts (Bloomberg, 2/12/2021) According to Bloomberg’s latest economist survey, President Biden’s $1.9 Tn stimulus plan could show the strongest economic growth since 1984.
- Who Wins the UX Arms Race: Traditional Banks or Neobanks? (The Financial Brand, 2/8/2021) How PNC’s user experience fairs against FinTechs like SoFi and Revolut.
- Survey Reveals a Hidden Customer Exodus Going on in Banking (The Financial Brand, 2/10/2021) According to a survey conducted by Bain & Company, 25 – 50% of consumers in the study made purchases that didn’t go through their primary banks.
- Fidelity Holds Secret Weapon to Take On Robinhood and Vanguard (WSJ, 2/10/2021) Fidelity’s Geode Capital Management could pose a threat to low cost investment firms like Robinhood and Vanguard.
- Inside The Billion-Dollar Plan to Kill Credit Cards (Forbes, 2/8/2021) How buy now, pay later fintech Affirm, changed the consumer lending landscape.
- Shopify Expands its Checkout System to Facebook and Instagram (WSJ, 2/9/2021) Facebook and Instagram users can now use Shopify’s checkout system, Shop Pay, to make online purchases.
- Exclusive: China’s Ant to Hive off Credit Data in Revamp; Sees IPO in 2 years – sources (Financial Times, 2/4/2021) According to anonymous sources, after the abrupt suspension of its IPO due to regulatory issues, Ant Financial is anticipating to make its market debut in about two years.
- Equifax Acquires Open Banking Partner AccountScore (FinExtra Research, 2/9/2021) Equifax’s acquisition of AccountScore will improve a consumer’s ability to demonstrate their creditworthiness.
- Life on Venus? The Picture Gets Cloudier (NY Times, 2/8/2021) Astronomers reported that they have detected a molecule called phosphine in Venus, which could be an indication of life floating in the planet’s clouds.