Shares in Nubank dropped 10% today as investors were seemingly spooked by reports of a potential £10 billion swoop for UK counterpart Monzo.
Reports at the weekend claimed that Monzo is in talks over a sale of both its entire business – to Nubank, Latin America’s largest FinTech – and a minority stake to private equity, with a third less likely option being a further traditional equity fundraise.
The news came as a blow to London’s public markets, as the City has long courted Monzo, one of the UK’s flagship digital banks, as a potential listing candidate.
However the potential cash-and-shares takeover offer from Nubank – worth between £8-10bn – does not seem to have gone down well with investors in the Brazil-headquartered firm.
Analysts speculated that investors were worried about potential share dilution; the size of the deal, given that it is potentially more than double Monzo’s £4.5bn valuation in 2024 during a secondary share sale; that Nubank has historically grown organically rather than through acquisitions; and that Monzo has a smaller net income relative to the massive acquisition cost.
Monzo reported a 39% jump in revenue to £1.7bn and 20% rise in pre-tax profits to £172.6m in its latest annual results.
Monzo has 16m customers, while Nubank has more than 139m.
Last year Monzo revealed plans to replace its CEO TS Anil with Diana Layfield, but a shareholder rebellion – led by venture capital firms Accel and Iconiq – saw him retained as vice chair amid demands for greater investor representation on its board.
Layfield began the role in February and has closed Monzo’s US operations, with a renewed focus on growth in Europe.