Nubank’s IPO Should Raise $3.4 Billion and Includes Exclusive Offer for Customers

Nubank is expected to debut on the NYSE at a market cap of more than $50 billion; customers will receive a free BDR; only retail customers can claim the offer

David Velez and Cristina Junqueira, founders of Nubank
November 01, 2021 | 05:01 PM

Bloomberg Línea — As one of the most anticipated initial public offerings of the year, Nubank’s IPO is expected involve around $3.385 billion if the shares are launched in the $10-$11 indicative price range. If the extra lots are taken and the price comes out at the top of the range, the offering could reach $4.89 billion.

Each active customer in Brazil may receive one Brazilian Depositary Receipt (BDR) free of charge in the offer. “Millions of customers will be invited to become partners of the company, at no cost, by receiving one BDR per person,” says Nubank.

Nubank is expected to reach the market with a valuation above $50 billion – bigger than that of Brazils largest banks and giants like Ambev. When Berkshire Hathaway’s mega-investor, Warren Buffett, made a $500 million investment in the company earlier this year, Nubank was valued at $30 billion.

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The transaction is expected to close on December 7 and the shares of Nubank will debut on the NYSE (New York Stock Exchange) the following day under the code NU.

Only for Nubank customers

Today, Nubank released its preliminary prospectus with data on the offer that revealed something new: only its customers will be able to join the retail offer. In other words, customers from competing platforms, such as XP and BTG, will not be able to apply for stock reservations. “The Nubank retail offering will be made exclusively to Nubank retail investors who place a reservation application with NuInvest,” says the prospectus.

Read more: Nubank confidentially files $50 billion IPO in the US and Brazil

In Brazil, the offer will be made through BDRs, and each six BDRs will be worth one share. The minimum amount for retail investment will be of 30 reais and the maximum, 300,000 reais. The general reservation period is from November 17 to December 7; for customers, the period ranges between November 9 and December 5.

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For the customer program, the bid coordinators initially set aside an amount of 180 million reais in BDRs. The volume of shares intended for customers may be increased by 25%, depending on demand. If demand exceeds supply, allocations will be made on a first-come, first-served basis.

Customers who join the program must keep the shares for a period of 12 months.

Plenty of cash

Nubank’s founders have class B shares – with a twentyfold right to vote compared to class A shares, which are the ones to be sold at the IPO.

The offering will be primary (289.15 million shares), which occurs when the funds go to the company, and secondary (43.37 million) for divesting by the partners. According to the prospectus, the company’s proceeds will be used for: working capital, operating expenses, capital expenditures, and new investments and acquisitions of businesses, products, services, and technologies.

Nubank chose to list the shares on the NYSE after competing with Nasdaq.

Read more: Brazil-based Ebanx acquires Juno to grow its service offerings

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Last month, Nubank reported its first profit since launching eight years ago. The fintech, which started as a credit card issuer, had net income of 76 million reais in the first half of the year in Brazil. At the time, Nubank attributed the profits to the growth of net interest income, which totaled 4 billion reais in the first half – 92% higher than in the same period the previous year. The figures presented were related only to operations in Brazil, concentrated in Nu Pagamentos S.A and its subsidiaries.

In the report, Nubank also highlighted that it ended June with more than 41 million customers, a 25% growth when compared to the previous semester and 60% when compared to the last 12 months. The company also said that customers transacted 92 billion reais in the period – an increase of 105% compared to the same period last year.

The offering will be coordinated by Morgan Stanley, Goldman Sachs, Citigroup, HSBC, and UBS. Among the Brazilian institutions, only Banco Safra is on the bank list, in addition to Nu Invest, the bank’s broker.