With a plus of 2%, things are already looking up for the FinTech IPO Index.
That statement shows how low the bar was set for the group, which, as highlighted here, was halved – and more – last year.
We’re just tongue-in-cheek here – a few trading days doesn’t make a trend, and a low single-digit percentage point rally is just a blip – and there’s about 51 trading weeks left in the year. The long road of 2023 lies ahead, and the troubles of 2022 remain intact.
These issues have a lot to do with interest rates, as the specter of higher interest rates still looms over stocks in general and FinTech IPO names in particular.
Economic data released on Thursday (January 5) shows that the labor market is still tight. The ADP National Employment Report showed that private payrolls rose 235,000 jobs last month. Tight working conditions point to higher wages, leading to inflation across the board.
Inflation weighs on corporate and consumer spending, which in turn hurts the revenues of the digital upstart and delays profitability (many of the names in our group have yet to stem the flow of red ink).
Relief Rally or Dead Cat Bounce?
Thursday’s trading action is emblematic of the recovery rally – if we will call it that – that was in the works for at least some individual names.
In fact, some of the FinTech stars are up double-digit percentages as measured by the closing trading days of a 2022 that no one cares to remember.
An aid rally would have to show a certain staying power; a “dead cat” would be a rebound where the stock price simply resumes its downtrend after a few days of rebound. In Wall Street jargon, even a dead cat will bounce if it falls far enough and hard enough.
Despite the general downtrend in shares in the broader markets on Thursday, Katapult is up 12% and up 35% in the past few sessions. The name is the springboard from a partnership announced in late December with iBUYPOWER, which makes high-performance custom gaming PCs, to provide consumers with a way to buy gaming gear.
Paysafe has collected 31% in the last five sessions. The company said late last year that ING Deutschland, the third largest bank in Germany, had partnered with Paysafe’s cash arm viafintech to give users the ability to deposit or withdraw cash at participating retailers.
Hippo Insurance is also up 31% over the same period, just behind Blend’s 30% gain.
Futu Holdings rose 11% on Thursday but is down more than 21% in the past five sessions, a downtrend that follows news that China’s securities regulator said the company had broken laws by charging consumers on the Mainland cross-border transactions permitted.
Corrective actions are reportedly in the works and the company has been asked to stop accepting new accounts from mainland customers. Separately, the company said it had postponed its planned dual listing on the Hong Kong Stock Exchange.
The next few weeks will tell. Earnings season starts in earnest late next week when the big banks start reporting earnings. And metrics on credit card/consumer spending and mortgage origination will say a lot about the future prospects of the names in the FinTech IPO Index, since so much depends on individuals and families continuing to open their wallets.
The common theme that runs through it all is that the digital disruptors need consumers and businesses to keep doing business.
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