By Bernard Lunn
The Daily Fintech Index is a list of publicly traded Fintech companies ranked by total market cap and by revenue multiple. I include any company where revenue is mostly derived from Fintech. I include VC funded startups as well as companies from an earlier generation (no ageist bias here). I include all types of Fintech:
- Traditional – sell technology to financial institutions
- Emergent – aka disruptive Fintech startups
- New wine in old bottles – financial services companies that are primarily tech driven.
A more purist index creator may choose to exclude some of them. I find the comparisons interesting, so I take a “broad church” approach.
Today we have a strange inversion: valuations are higher in the private markets than in public markets.
Yes, there is a bubble – but very few people are affected because the bubble is in the private markets.
Retail investors who get an “opportunity” to invest in these late stage ventures at unicorn valuations should be very, very careful. So should founders who are chasing these unicorn headlines. We don’t know the value of common stock in these private deals. Would an acquirer pay cash at that valuation? Would public market investors value the business at these levels after an IPO?
Back in December 2014 I published my list of Fintech Unicorns. It was a short list, because my criteria is realizable value for common stock over $1 billion
We cannot analyze all these private market deals. Companies only release snippets of information in press releases. However we can analyze the publicly traded Fintech companies.
That is the point of public markets – any Joe Q Public can run any analysis they like.
Daily Fintech is in the insights business, not the news business. We analyze based on insights generated offline and data available online.
Notes to the Fintech Index:
- Normalized to US$. Market Cap is in $ billions.
- Revenue multiple is easy to get for US stocks (I use Yahoo Finance, for all its faults), but harder on other exchanges. If anybody knows a good free site for global stocks please tell me. It has to be free so that anybody can check my data.
- I have an arbitrary cut off of $300m market cap to exclude all those “too small to be public” stocks.
Warning. This is not investment advice. It is only a crude first filter. If you really want to invest in any of these you will need to check out quality of revenue, growth rates, balance sheet and much else.
Why I use revenue multiple as the single easiest comparator – see this timeless classic from Bill Gurley at Benchmark Capital.
Here is the Index ranked by Market Cap:
|Company||Symbol||Market Cap $bn|
|Jack Henry & Associates||JKHY||5.3|
|Fair Isaac Corp||FICO||2.7|
Here is the Index ranked by Revenue Multiple:
|Jack Henry & Associates||JKHY||4.1|
|Fair Isaac Corp||FICO||3.3|
I will be mining this data for insights in future posts. My first takeaway from this data is that investors think that Visa and Mastercard will survive and thrive during all the payments disruption – as indicated by high Revenue Multiple.