Fintech IPOs Give Hope To a Comeback Despite Market Volatility
Plus, Databricks agrees to aquire Neon for $1 billion.
Newcomer’s fintech summit Breaking the Bank is on Tuesday.
We’ll have the CEOs of Plaid, Lead Bank, Rogo, Gusto, Kraken, Ramp, and more on stage. Spots are extremely limited, but if you’re a fintech founder, investor, or insider and want to see if you can get a last minute ticket, email riley@newcomer.co.
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This Week in Short
Between eToro’s successful IPO and Chime’s S-1, the financial startup market is showing signs of life. Stablecoins gain more legitimacy from legacy banking players like Visa and Mastercard, and the Trump-favored legislation to build a standardized legal framework for the tokens is nearing passage. M&A is up for AI companies — Databricks announced its acquisition of Neon for $1 billion. President Trump wraps up his tour of the Middle East with a host of chip and server deals.
The Main Item
IPOs Show Life & Stablecoins Surge as Fintechs Ride the Trump Rollercoaster
The IPO window opened up just enough this week for stock-trading app eToro to slip through, and banking platform Chime is right behind it after filing its public S-1 this week.
EToro priced above its projected range and rose nearly 30% in its first day of trading Wednesday, clearly a bullish sign for the IPO market. A successful debut for Chime would solidify the cautious rebound in fintech sentiment that we wrote about in early April.
Still, volatility is the order of the day for the fintech sector, whose fate is closely tied to interest rates and the overall economy. Affirm Holdings, for example, saw its shares drop 15% last Friday after a disappointing earnings forecast, only to recover the losses a few days later when it announced a new deal with Costco. Klarna, the Swedish buy-now-pay-later company, pulled back its IPO after the tariff-driven market swoon, and isn’t rushing to get it on the books again.
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The Trump Administration’s business-first approach and hostility to regulation, along with expected tax cuts, should be big positives for fintechs, but uncertainty reigns there too. An eagerly awaited piece of legislation that would clear the way for stablecoins to be integrated into the global financial system is now stalled in Congress over objections to the Trump family’s unabashed (and likely unconstitutional) crypto profiteering.
VC investment in fintech startups remains muted compared with the pandemic boom years, according to new PitchBook data. One prominent early-stage VC told us he’s still bearish on fintech as AI companies monopolize the interest of early-stage investors. “Whoever says its back isn’t doing fintech deals,” he quipped.
Yet others argue that “fintech” is too broad a category. “If by fintech you mean lending, that's not enjoying a resurgence,” said Ali Partovi, the CEO of Neo, a VC fund and mentorship community. “If you mean new ways to give ordinary investors more access to build wealth, very exciting. I like startups that are rethinking how everyday people can become investors and participate in financial opportunities that are historically available only to the wealthy few.”
He cited Kalshi, Arrived Homes, and Dub as examples, and said they are all “crushing it.”
Unsurprisingly, investors remain excited about startups that are using generative AI to supercharge fintech services, whether for automating accounts receivable to building AI agents to doing Wall Street analyst work. Big financial services firms including Visa, Mastercard, and PayPal have all launched AI agent toolkits in recent weeks.
The dynamic around stablecoins shows the promise and peril of the current moment.
Stablecoins, which are pegged to the value of a fiat currency, usually the dollar, have seen a surge of interest in recent months in anticipation of the new legislation, which would establish some rules and clear the way for much broader usage. Currently stablecoins are mostly used within the crypto trading community, and the biggest one, Tether, operates offshore.
But the GENIUS Act, as the stablecoin bill is known, was blocked last week by Senate Democrats amid outrage over the President’s personal crypto activities, which include a stablecoin issued by a family firm, World Liberty Financial. And those aren’t the Administration's only conflicts: Tether’s most important business partner is Cantor Fitzgerald, where Commerce Secretary Howard Lutnick was the CEO until February.
Senator Cynthia Lummis was optimistic Thursday that the Senate could pass a newly tweaked version of the GENIUS Act when it returns to the floor next week. Democrats say they’ve won some important concessions, though they don’t appear to address the Trump issue directly.
Stablecoins are especially interesting for cross-border transactions, notably foreign-worker remittances, that currently carry very high fees. Unlike other crypto tokens, they are supposed to be backed one-to-one by US treasury bills or other liquid assets and carry no risk. They can be highly profitable for the issuer, who collects the interest payments on the collateral.
To date, though, stablecoins have suffered some of the same instability and legal troubles as other crypto tokens, with numerous instances where they became “de-pegged” from the dollar. Tether has been accused of facilitating criminal activity, and has launched accusations of its own against arch-rival Circle.
In principle, the new legislation will subject stablecoins to anti-money laundering regulations and a variety of consumer protection rules, and make them safe for more mainstream use.
Financial services companies old and new are counting on that as they scramble to position themselves for a surge in stablecoin activity. Visa and Bridge made plans to launch cards linked to an individual’s stablecoin balances last month, and Mastercard announced a similar partnership with MoonPay on Thursday. Stripe, which made a big move last fall with the acquisition of Bridge, and expense decacorn Ramp announced a similar partnership around stablecoin cards. PayPal will start paying interest on stablecoin balances.
Things can never be certain with financial policy under Trump so tenuous — but at least for now, investors see silver linings poking through the clouds.
Five Notable Deals
Neon, Addepar, Stash, Owner & Classiq
Databricks continued its M&A spree, and quantum computing got another boost.