Greetings, Term Sheeters. This is finance reporter Luisa Beltran, subbing for Allie.
Chime Financial waited years to go public and ended its first day of trading on Thursday with a $16.1 billion valuation. That’s 36% lower than the $25 billion valuation Chime snagged in 2021, when it was a buzzy fintech unicorn.
Still, the Chime IPO is being celebrated as a win for the company—and more importantly, as a clear signal that the public equities market has cracked open for new issues, especially those in the fintech category.
Dan Dolev, a senior analyst in fintech equity research at Mizuho Securities, said the IPO market is open for fintechs. “There is a lot of thirst for fintech IPOs. If you are going to do a fintech IPO, this is the Chime,” Dolev quipped.
Shares of Chime opened Thursday at $43, up 59% from its $27 offer price. The stock soared to an intraday high of $44.94 before losing momentum, closing at $37.11.
Shawn Carolan, a partner at Menlo Ventures who led the venture firm’s investment in Chime, said he was proud of the fintech’s performance. “Any time you price above the range and trade up, it’s a good day,” Carolan said.
Menlo Ventures, along with Chime’s management, are not selling shares in the IPO. “The companies that are good you want to hold on to,” he said.
Founded in 2012, Chime offers traditional financial services, like fee-free checking and savings accounts, to lower income U.S. consumers that earn up to $100,000 a year. The startup had 8.6 million active members as of March 31, with two-thirds relying on Chime as their primary bank, according to a regulatory filing. Roughly 70% of its members use Chime to buy food, groceries, gas and utilities.
Chime is building a generational financial services company, said COO Mark Troughton, who spoke to Fortune from the Nasdaq. “We knew from day one that we wanted to be public. It’s time to execute in the public market,” he said.
Chime is one of several companies, including eToro, Hinge Health and MNTN, that have recently delivered strong debuts. Many have retained those gains in the aftermarket. But it’s the breakout performance of crypto firm Circle that renewed investor appetite for high growth tech companies. Last week, Circle rocketed 168% in its debut on the New York Stock Exchange after raising $1.05 billion with its IPO. Circle’s stock continued to gain in later trading sessions and is currently up 243% from its $31 offer price.
Chime’s more modest first-day pop came after the neobank raised $864 million late Wednesday. The fintech sold 32 million shares at $27 each, $1 above its $24 to $26 price range. Of the 32 million shares, about 6.1 million are coming from shareholders while the company is providing the rest.
Chime could’ve gone public “way earlier” but had to wait for the markets to settle down for the IPO window to open, Menlo Ventures’ Carolan said. IPOs have largely been on hold since the go-go days of 2021, when 397 companies went public using a traditional IPO. But their dismal performance, roughly 80% of the Class of 2021 are still trading below their offer price, cast a pall on new issues. Since late 2021, the number of IPOs has slowed down significantly.
Carolan thinks the IPO market is open for great companies. Strong companies like Chime can go public in any market, he said. “It remains to be seen if the market is receptive to much smaller companies that are less profitable or growing slower,” he said.
See you Monday,
Luisa Beltran
X: @LuisaRBeltran
Email: [email protected]
Submit a deal for the Term Sheet newsletter here.
Nina Ajemian curated the deals section of today’s newsletter. Subscribe here.
This story was originally featured on Fortune.com
