24th February 2024

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Business Industry and Financial

FinTech IPO Gains 2.1% as Platforms’ Stocks Swing Wildly

The platforms held sway this past week — where volatility reigned on Wall Street.

And within the FinTech IPO Stock Index, we saw gainers and losers in roughly equal measure, with double-digit movements to the upside and downside … and the result was that through the past five sessions, the Index was up 2.1%.

Year to date, the group is up 11.4%.

And to get a sense of how significant the moves have been — albeit off low bases, as many of these names are small or-microcap stocks when it comes to market capitalization — consider that 9F Group soared 49%.  

There were no headlines in the trade press or from the company itself to help explain the move, as was the case with XP, which soared 26%. Katapult, which is focused on eCommerce through an omnichannel point-of-sale platform, gained 14%.

Lufax and Robinhood Among Key Newsmakers 

China-based Lufax, which operates as a personal financial services platform, filed its 20-F with the SEC. In that filing, the company noted that it had a cumulative total of 19.0 million borrowers as of Dec. 31, 2022. The total outstanding balance of loans was RMB576.5 billion (US$83.6 billion) as of Dec. 31, 2022, of which RMB29.7 billion (US$4.3 billion) or 5.1% consists of loans enabled by Lufax’s licensed consumer finance subsidiary. Small business owners accounted for 86% of all new loans enabled under the company’s Puhui brand in 2022, up from 78% in 2021.

Robinhood shares were up 3.3% on the week.

As we reported here, Robinhood has reached a $10.2 million settlement with state securities regulators regarding operational and technical failures. The settlement includes the platform’s outages in March 2020 and operational deficiencies before March 2021. These failures left the stock trading and investing platform’s users unable to process trades.

An investigation led by state securities regulators in Alabama, California, Colorado, Delaware, New Jersey, South Dakota and Texas found that, prior to March 2021, Robinhood had deficiencies in its review and approval process for options and margin accounts, monitoring and reporting tools, and customer service and escalation protocols.

SoFi was 2% higher. 

Jefferies reiterated a buy rating on the stock, tied in part to the company’s Wyndham acquisition, which the sell-side firm expects to help accelerate mortgage originations.

In our own reporting on the company this past week, we wrote that “the push and pull on student loans has spotlighted SoFi’s digital platform model and the emergence of online financial service ecosystems.” SoFi has filed suit to halt the Biden administration’s continuing moratorium on student loan payments.

U.S. Rep. Ayanna Pressley (D-Massachusetts) and Sen. Elizabeth Warren (D-Massachusetts) sent a letter to SoFi alleging that the suit is an “attempt to use the courts to enact a backdoor repeal of this payment pause.”

In the lawsuit, SoFi (specifically, SoFi Lending Corp.) reports that “it competes with the federal government for federal student loan borrowers by offering them private financing under more favorable terms. In addition to lower interest rates and revised loan periods, SoFi also offers deferment and forbearance for eligible borrowers under certain circumstances, such as during periods of graduate education or financial hardship.”

But the moratorium, the company has said — where privately refinanced loans such as SoFi’s are ineligible — “has eliminated the primary benefits of student loan refinancing. In essence, SoFi is being forced to compete with loans with 0% interest rates and for which any ongoing repayment of the principal is entirely optional.” 

Loan originations, by last year, were 1/10th of the refinancing volumes seen in 2019. SoFi contends in the filing that it has lost approximately $300 million to $400 million in total revenues from its federal loan refinancing business during the moratorium. As a result, SoFi has lost roughly $150 million to $200 million in the same time frame.

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