Brazilian digital bank Nu Holdings, the biggest unicorn in the region, is planning an initial public offering next month, when it will seek to top the $25 billion valuation. While a successful IPO would be a boon for its investors, including Warren Buffett’s Berkshire Hathaway Inc., it would also attract scrutiny from competitors because it will be used as a reference point for many upcoming transactions. Multibillion-dollar startups such as delivery-services provider Rappi, used-car reseller Kavak and digital real estate broker QuintoAndar have already said they may pursue an IPO. Latin American fintechs could also follow Nubank’s path, including C6 Bank, backed by JPMorgan Chase & Co.; Banco Neon, which is backed by General Atlantic; or Mexican payments firm Clip, in which SoftBank Group Corp. has a stake.
Firms would be going public just as Latin America’s economy is slowing, with gross domestic product expected at 2.5% next year, below this year’s 6.7% and the average estimate for worldwide GDP of 4.4%, according to data compiled by Bloomberg. Forecasts for Brazil, the biggest economy in the region, are even weaker, at 1.8%. Despite the expected economic slowdown, the region saw a surge of private investments in startups in 2021, though public equity markets failed to keep up. Startups in the region raised a record $14.1 billion in private capital this year through Nov. 12, more than tripling the amount in all of 2020, according to PitchBook. Those firms raised three times more through private equity markets than they did via public stock exchanges, either locally or in the U.S., according to Pereira at Bank of America. For U.S.-based companies, the ratio was closer to 1.5 times.