Warren Buffett-Backed Nubank Hits Stock Exchange With Hyped $41B IPO: Should You Invest?

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Warren Buffett-backed Brazilian digital bank Nubank went public this morning — under the ticker “Nu” on the New York Stock Exchange (NYSE) — in a $41.5 billion valuation. This valuation makes the Nubank move one the largest initial public offerings (IPO) of the year.

In June, Warren Buffett’s Berkshire Hathaway made a $500 million investment in the digital bank — a bank recently recognized as one of the most influential companies in the world by TIME — a move that could seem surprising at first glance, but makes sense from a strategic perspective, some experts say.

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Cathy Seifert, VP at CFRA Research, told GOBankingRates that “getting the Berkshire Hathaway ‘seal of approval’ was a significant milestone for Nubank and aided in the successful completion of its IPO.”

“Though this transaction alone is not significant for a company the size of Berkshire, it does represent a foray into a different type of investing for Berkshire and will likely lead to other transactions,” Seifert added.

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Nu Holdings, the parent company, raised $2.6 billion by offering 289.2 million shares at $9 — the high end of a downwardly revised range of $8 to $9 — according to a note from Renaissance Capital.

The company originally planned to offer the same number of shares at $10 to $11 before lowering the range at the end of November, according to an amended Securities and Exchange Commission (SEC) filing.  At $9, Nubank’s valuation is nearly $41.5 billion, Barron’s reports.

The Wall Street Journal reports that this would be the fifth-largest IPO of the year in the U.S. based on the amount to be raised, according to Nicholas Einhorn, vice president of research at Renaissance Capital.

The company said it believes Nu is one of the world’s largest digital banking platforms (based on number of customers) — and one of the leading technology companies in the world, with 48.1 million customers across Brazil, Mexico and Colombia as of September 30, 2021, according to the SEC filing. The company has a particularly young customer base, with more than 70% of its customers being under 40 years old — and at an average age of 34 — as of September 30, 2021.

This reality provides Nu “with the opportunity to grow with customers who are in the early stages of their financial journeys. We believe our youngest customers (20-24 years old) will grow their real income by about 70% in the next ten years,” according to the prospectus.

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Before co-founding Nu in 2013, CEO and chairman David Vélez was a partner at Sequoia Capital.

In a blog post congratulating Velez on Dec. 9, Sequoia Capital said “at first, the competition failed to take Nubank seriously; they didn’t understand the deep technological work involved in the backend of the deceptively-simple user experience, and thought the company was nothing more than an app. As David posted recently on LinkedIn: ‘First they ignore you, then they laugh at you, then they fight you, then you win.'”

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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