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Generally, this has been a pretty terrible year across the board for Fintech. A number of stocks are down by over 80%, when the S&P 500 was down about 22%. Th
by pranshum 4y ago
Generally, this has been a pretty terrible year across the board for Fintech.
A number of stocks are down by over 80%, when the S&P 500 was down about 22%.
The standout fintech stock is DAVE, which is down an amazing 97%!
A common argument for why it is happening is that investors are moving to safer stocks, as interest rates rise. But this is only partially true: a bunch of the businesses are genuinely doing worse. Eg, Coinbase's revenue is down 27% QoQ, Upstart revenue is down 30% QoQ, Affirm revenue is flat and no longer growing.
And most of the sector is super unprofitable, burning a ton of money. Lemonade's margins are -120%.
I wrote about all of these observations here: https://yarn.pranshum.com/ipos_int https://yarn.pranshum.com/ipos_int
- halpmeh 4y agoA lot of spending in fintech was fueled by low interest rates. So there is kind of a trifecta forming to lower crypto equity prices caused by higher interest rates: 1. The risk-free return is higher, which lowers the value of risky assets broadly. 2. The increased cost of borrowing money makes it more expensive to run a cash-flow negative business. 3. Part of the spending in crypto was driven by speculation, which was a side-effect of free money.
- Ferrotin 4y agoAnd 4. The price was too high given any reasonable projection in the first place.