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Apr 18, 2023 545

“Fintechs: Bigger Exit = Larger Value Decline in 2022”

According to a recent report by F-Prime Capital, the public market correction has affected tech and fintech stocks the most. The Fintech Index, which tracks the performance of emerging, publicly traded financial technology companies, was down by a staggering 72% in 2022. The index, which comprises 55 companies across B2B SAAS, payments, banking, wealth and asset management, lending, insurance and proptech, hit a peak of $1.3 trillion in late 2021 but slid to $397 billion by the end of 2022.

David Jegen, managing partner of F-Prime Capital, said that the biggest shift in 2022 was that public investors got to weigh in on fintech stocks for the first time. He added that this was probably not great timing considering the broad macroeconomic impact on tech. Jegen also noted that the fact that so many fintech companies went public was a big deal in and of itself. He said that there had been ten years of exciting fintech disruption, all of it led by private investors. Therefore, 2021 was huge because the IPO window was open when there was a really mature cohort of fintech companies.

The decline was especially pronounced for the ten largest exits during the peak years of 2020-2021. In other words, the bigger the exit, the larger the decline. The cumulative market cap decline for the top ten recent exits totaled over $220 billion. Coinbase, NuBank, Robinhood, SoFi, Affirm and Wise all saw their valuations tumble.

It is worth noting that fintech companies have been disrupting traditional financial services for some time now. They have introduced new products and services that have made it easier for people to access financial services. For instance, fintech companies have made it easier for people to make payments, borrow money, invest, and manage their finances.

However, the recent decline in fintech stocks is a reminder that investing in emerging technologies can be risky. It is important to note that not all fintech companies are created equal. Some are more innovative than others, and some have better business models than others. Therefore, investors need to do their due diligence before investing in any fintech company.

Despite the recent decline in fintech stocks, there is still a lot of potential in this industry. Fintech companies are still disrupting traditional financial services and introducing new products and services that are making it easier for people to access financial services. Therefore, investors who are willing to take on some risk may find opportunities in this industry.

In conclusion, the recent decline in fintech stocks is a reminder that investing in emerging technologies can be risky. However, there is still a lot of potential in this industry. Fintech companies are still disrupting traditional financial services and introducing new products and services that are making it easier for people to access financial services. Therefore, investors who are willing to take on some risk may find opportunities in this industry.