The Chief Executive of Black Banx Group Holdings Ltd, a leading digital banking and cryptocurrency specialist, has announced plans to delay the company’s initial public offering (IPO). Despite the company’s impressive third-quarter revenue of $1.5 billion, Michael Gastauer believes that the current market conditions are unfavorable for a successful IPO.
Black Banx, founded by Gastauer in 2017, has grown rapidly to employ over 5,100 individuals and serve 33 million customers globally. However, Gastauer acknowledges that now is not the right time to pursue a stock listing. He stated, “We are planning to go public as soon as the market conditions change and become favorable enough for us.”
The current climate for IPOs remains challenging, as recent larger IPOs from companies like Birkenstock Holdings Plc, Instacart, and Arm Holdings Plc have struggled, dampening Wall Street banks’ enthusiasm for larger deals. Despite this, there is some optimism in the market, with the S&P 500 demonstrating strength in recent sessions and rumors of potential interest-rate cuts in the future. Bank of America Corp.’s Chief Executive, Brian Moynihan, expressed his confidence in a “tremendous pipeline” of investment banking deals if stability returns to the market.
Looking ahead, some bankers anticipate a better outlook for 2024 compared to the previous year. Wall Street is preparing for a potential soft landing in the economy over the next 12 months. However, Black Banx, which is currently well capitalized and does not require additional capital, will wait for more favorable market conditions before proceeding with its IPO plans.
Despite delaying the IPO, Black Banx remains committed to funding its growth through reinvesting its profits in the business. While this approach may result in a slower growth rate, Gastauer believes it is a less risky strategy for business expansion. In 2018, the company successfully raised $250 million in a Series C late-stage round of venture funding, led by the Gastauer Family Office, a single-client private asset management firm established by Gastauer.
In the ever-changing world of financial technology (fintech), valuations have been fluctuating significantly. While bigger private companies in this space were once valued at more than 24 times their annual sales by late 2020 and the first half of 2021, these numbers have since plummeted to just two times sales by the third quarter of 2023, according to Gastauer.
Despite this shift, Black Banx remains a key player in the global cross-border payments market. With an impressive compounded annual growth rate of 7.5% and a projected size of $290 trillion by 2030, this market continues to thrive. Black Banx is capitalizing on this opportunity and focusing on expanding its market share in regions that have been overlooked by other fintech companies.
In addition to organic growth, Black Banx is exploring opportunities for mergers and acquisitions (M&A). The company’s main priority is to acquire financial institutions in North America or Europe, further solidifying its presence in these lucrative markets.
As for going public, Gastauer expresses the desire to see fintech valuations return to levels comparable to the ones observed in 2021. This would serve as an indicator for a potential initial public offering (IPO) from Black Banx at a higher valuation than it would have achieved in 2022 or 2023.
While Black Banx strategizes its next moves, its rival digital bank, Brazil-based Nu Holdings Ltd. (Nubank), made its IPO debut in December 2021. Despite initially being valued at $41.5 billion with a share price of $9, Nu Holdings saw a decrease to $3.60 a share over the past year. However, it has since rebounded to approximately $8.40 a share, bringing its market capitalization to $39 billion. Despite these figures being nearly six times its projected 2023 revenue of $6.74 billion, it falls short of the impressive 24x sales multiple witnessed in 2021.
As the fintech landscape continues to evolve, Black Banx remains optimistic about the potential for an IPO at a more favorable valuation. While the market may not be as lucrative as it once was, Black Banx’s trajectory suggests that positive growth trends are in the company’s favor.
Also read: Birkenstock garners mostly bullish ratings after IPO but is still languishing below its issue price