Nubank’s IPO Filing Gives us a Peek Into Nubank Economics

We are progressively gaining a clearer sense of the economics of such business initiatives as the nubanking boom has grown into a collection of huge digital banks. Unlike less lucrative European nubanks, Chime was among the first to advise the market that it was EBTIDA positive. 

Thanks to its freshly public filing, the planned Nubank IPO — officially, the public offering of Nu, but we’ll simply call it Nubank for convenience — offers us significantly more information and detail detailing the functioning of a nubank at scale.

The figures Nubank has released appear to make quite good business sense, which is excellent news for its colleagues who may wish to go public. We will have more information on the company’s offering, its stockholders, its many business lines, and more as time goes on. We are focusing on the general economics of nubanking this morning, and we will wrap off with a look at Nubank’s overall financial health. We will take a few moments in the conclusion to compare our findings to a few value marks.

Nubank is preparing for its closeup through the epidemic, amid a frenetic pace of FinTech-related listings activity on U.S. markets. Nubank, a Latin American bank with roots in Brazil, is the latest in a long line of nubanks to issue its shares on the stock exchange, but it has the distinction of being supported by Warren Buffett, the legendary billionaire investor (specifically, through Berkshire Hathaway).

Creating a large-sized nubank is not cheap. Leading market shareholders and unicorns have raised a lot of money to get them where they are now. What all that money bought them, though? In the case of Nubank, it seems to be quite a bit. Nubank takes pride in the low cost of acquiring new customers (CAC). According to the company’s F-1 filing, their CAC for the first three quarters of 2021 was “US$5.0 per client, with paid marketing accounting for around 20%.” To be honest, that is lower than we expected.

The Securities and Exchange Commission (SEC) has received a secret filing from the corporation in the form of an F-1. Because of the filing’s confidentiality, the facts of the company’s financials have yet to reveal. However, enough information is available – and has been shared by peer nubanks that have gone public – to provide a read-across of patterns and a blueprint for what lies ahead.