After Klarna IPO, is UK’s crypto-friendly neobank Revolut next?

(Originally posted on : Invezz )

Klarna, the Swedish Buy Now Pay Later (BNPL) company, has filed to go public in New York, a move that will make it one of the biggest IPOs in recent years. 

The company will join Affirm, the American BNPL giant that went public in 2021. After its initial surge, Affirm stock crashed to $8.52 in 2022 as most technology companies plunged. Since then, the company has crawled back to $54, with its market cap jumping to over $17 billion.

It is unclear how much valuation that Klarna will receive when it goes public. What is clear, however, is that Klarna will not be the $46 billion it received in private funding a few years ago. Like most fintech companies, including publicly-traded ones like PayPal and Block have had to go through a valuation reset in the past few years.

Revolut IPO could be next

Klarna’s filing to go public could open the opportunity for more technology companies to launch their Initial Public Offers (IPO) in the coming months.

Besides, interest rates are falling in the US and other countries, making it an ideal period to go public. The Federal Reserve slashed interest rates by 0.25% last week, and is on track to deliver more cuts in the coming meetings. 

One of the top companies that could decide to launch its initial public offering, either in the United States or in the UK, is Revolut.

For starters, Revolut is a UK-based company that operates one of the biggest neobanks in the world. The most recent share sale valued it at over $45 billion, making it the 20th-biggest company in the UK.

That valuation makes it smaller than Barclays, which has a valuation of over $47 billion. It is also larger than Lloyds Bank, the biggest mortgage lender in the country. Revolut is also bigger than some of the top European banks like Societe Generale, NatWest, Nordea, and Deutsche Bank.

Revolut’s business has simplified how millions of its customers handle their cash. It has no branches, meaning that users only interact with it through its applications and website. 

Revolut, which received a banking license recently, offers solutions like accounts, money transfer, crypto and stocks investing, multi-currency accounts, corporate cards, and other services. 

Customers love Revolut because of its lower costs and its subscription model. While its standard account is free, Revolut’s plus, premium, and metal accounts cost £3.99, £7.99, and £14.99 in monthly fees.

Revolut’s business has been doing well in the past few years. In July, the company announced that its revenues jumped by 95% in 2023 to $2.2 billion, while its profit before tax soared to $545 million. This happened as it added 12 million customers, bringing the total number to 45 million. 

Lessons from Nu Holdings

Revolut has not confirmed when it will go public. However, as a company that has received investments from venture firms like Softbank, Tiger Global, Molten Ventures, Schroders, and Coatue Management, going public is inevitable. 

Besides, some of the top neobanks like Dave and Nu Holdings and Dave have done well as publicly traded company.

Nu Holdings, which is backed by Warren Buffett, has done well as a publicly traded company as it has grown its business in the Latin American region. Nu’s stock has surged by 380% from its lowest level in 2022, bringing its market cap to $75 billion.

Dave, an American neobank, has also jumped by 1800% from its lowest level in 2023, valuing it at more than $1.2 billion. 

In the UK, while Wise stock remains below its IPO level, it has jumped by 193% from its lowest level in 2022. 

Therefore, Revolut will likely go public to mirror the successes of these companies. What is also unclear is whether Revolut IPO will happen in London or in the United States. Most analysts are inclined to believe that the IPO will happen in the United States, which is more welcoming to tech companies.

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