From Fintech Darling to IPO Hopeful

Chime, once a high-flying fintech company valued at $25 billion in 2021, is preparing to launch its initial public offering (IPO) amid a recovering market. The company, which delayed its IPO plans during the peak of the market frenzy, now faces a landscape where its valuation appears to have decreased substantially. As the IPO market shows signs of life with companies like Circle, the crypto provider, looking to list, Chime is poised to test investor appetite.

IPO Market Rebound: A Glimmer of Hope

Recent IPOs have demonstrated strong performances, signaling a potential resurgence in the market. Group Building, Hinge Health, and MNTN, the connected TV advertising platform, have all seen their stock prices rise above their IPO prices. Next week, Circle, the issuer of the crypto stablecoin USDC, is set to begin trading on June 5, in what will be one of the biggest tests for IPOs. Circle’s IPO is reportedly multiple times oversubscribed, according to Bloomberg.

Chime’s IPO: What to Expect

Chime is expected to launch its roadshow soon, providing more details about its pending IPO, including the number of shares it will sell and at what price. The fintech company will trade on the Nasdaq under the ticker CHYM.

Chime: A closer Look

Founded in 2012, Chime offers fee-free checking and savings accounts to lower-income U.S. consumers earning up to $100,000 a year.As of March 31, the startup had 8.6 million active members, with two-thirds relying on Chime as their primary bank, according to a regulatory filing. Approximately 70% of its members use Chime to buy food,groceries,gas,and utilities. The company employs 1,465 workers, or “Chimers,” across three offices, with one-third located in San Francisco.

According to Dan Dolev,a senior analyst in fintech equity research at Mizuho Securities,Chime definitely has a great brand for that particular cohort,the under banked. They’ve done a great job getting the name out there.

Valuation Concerns: A Significant Drop?

Chime has raised $2.3 billion in funding from investors, including General Atlantic, tiger Global Management, and Sequoia Capital. In 2021, its shares were valued at $69.07. However, pricing data from Forge, an online marketplace for buying and selling shares of private firms, marked Chime at $31.50 as of May 26. on Hiive, a private stock marketplace, the last accepted bid for Chime was $31 in early March. There are also standing bids for Chime shares at $40, but no sellers, indicating that sellers are waiting for prices to move higher.

A $31 or $31.50 price indicates a drop in value of more than 50%. Chime has yet to disclose how many shares it has outstanding, so the fintech’s total valuation is unclear.

Matt Kennedy, senior IPO strategist at Renaissance Capital, stated, Like many companies, Chime likely could have gotten a higher valuation had it gone public at the peak of the last cycle in 2021.

Chime declined to comment.

Competitive Landscape: A Crowded Field

The market for financial services targeting lower-income consumers has become increasingly competitive. Green Dot, which has targeted this segment since 2001, is currently up for sale. Chris Britt, Chime’s cofounder and CEO, previously worked at both Green Dot and Visa. One of Chime’s major rivals is Cash App, which targets the same demographic. Revenue for Cash app in 2024 rose 11% to $16.2 billion, with most, about $10.1 billion, coming from Bitcoin trading. Block, formerly known as Square, owns Cash App.

Dolev noted, Cash App is so established that it makes it difficult to compete.

Mizuho’s Dolev says Cash App has a more diversified revenue stream than Chime, which relies on unregulated interchange-debit card fees not subject to a federal cap. Dolev estimates that Chime makes about 1% of every dollar spent in debit card transactions on a net basis, while large banks are capped at 21 cents per transaction.Such as, if a consumer uses a Chime debit card to buy $50 worth of groceries at the supermarket, the fintech makes about 50 cents.

Kennedy of Renaissance Capital said Chime is the first US-based neobank to go public via a conventional IPO. (Nu Holdings, of Brazil, went public in 2021 but targets Latin America.) Other neobanks waiting to launch their IPOs include Klarna, which is reportedly delayed until late in 2025, and Revolut, which is widely anticipated to go public but has yet to set a date.

Financial Performance: Profitability on the Horizon?

Chime is unprofitable on a yearly basis, with losses narrowing to $25.3 million in fiscal 2024. The company was profitable in the first quarter, reporting nearly $13 million in net income, compared to nearly $16 million in profit for the same quarter in 2024. (But it reported nearly $20 million in losses for the three months ended Dec. 31.)

Revenue for Chime rose 31% to about $1.7 billion for fiscal 2024 and grew on a quarterly basis, by 32%, to $518.7 million for the three months ended March 31.A majority of its revenue comes from interchange.

Kennedy added, I think we would have liked to see more progress on the bottom line, the net income side, but I don’t see any huge red flags.