You work hard for your money. Therefore, you wouldn’t trust your financial lifeline to just any random company. Instead, your instinct is to seek out a trusted organization with a strong track record. Unsurprisingly, then, many consumers choose to do business with a credit union for its product flexibility and deep ties to the local community.
However, credit unions and local banks admittedly have drawbacks, primarily dealing with platform and program options. But what if you could combine the latest financial technologies with community soul? That’s the catalyst for the FinWise Bancorp stock offering.
When Did FinWise Bancorp IPO?
FinWise Bancorp IPO’d on November 19, 2021.
FinWise Financial History
Although the COVID-19 pandemic resulted in net devastation for the economy, not all sectors suffered the full weight of misery. Indeed, some market segments benefitted from the public health crisis, including the financial services industry. Here, banks and credit unions catered to 2 stark categories: demand of desperation (such as debt repackaging) and demand of exuberance (i.e., record-breaking surge in home purchases).
As a beneficiary of the sudden spike in consumer sentiment, FinWise enjoyed a remarkable fiscal renaissance. The proof is in the numbers. Back in 2019, the financial technology (fintech) and services firm carried total assets of $177 million, up almost 53% from the year-ago asset base of $116.1 million. Keep in mind that this expansion occurred during the pre-COVID Trump administration, which oversaw an outstanding labor market.
But in 2020, circumstances for FinWise improved beyond this fortuitous outcome, with the fintech posting total assets worth $317.5 million, up 79% year-over-year. Further, net income expanded significantly last year despite COVID-19 to $11.2 million from $9.7 million in 2019. Naturally, net interest income contributed heavily to the bottom line, with 2020’s books posting $27.8 million, up 39% from a year earlier.
As things stood at its IPO, FinWise commanded a market capitalization of $172 million with an enterprise value of $97.8 million. While impressive, the obvious criticism against FINW stock is that the underlying business may feature a disjointed revenue stream moving forward. As impressive as the housing boom has been, for instance, it’s unreasonable to assume — based on the economic principle of resource (monetary) scarcity — that FinWise can continue banking on an indefinitely upward trajectory.
While a valid point, bear in mind that the pandemic also sparked positive changes that FinWise can use to its advantage. Primarily, during the lockdowns, credit union and banking customers planned to switch primary institutions due to service dissatisfaction. Evidently, FinWise has been doing something right to post top-notch growth during an otherwise troubling year.
Following a successful roadshow and meetings with prospective institutional buyers and high-net-worth investors to drum up interest for the market debut, FinWise had a date on the IPO calendar of Aug. 12, but that date was pushed back to November.
Piper Sandler (NYSE: PIPR) served as the sole bookrunner for the IPO, while Stephens Inc. — a privately held, independent financial services firm in Little Rock, Arkansas — provides support as the co-manager for the debut.
According to FinWise’s prospectus with the U.S. Securities and Exchange Commission (SEC), management intended to use the net proceeds from the offering “to fund organic growth, to continue the buildout of our operating infrastructure and for general corporate purposes, which could include future acquisitions, maintenance of our required regulatory capital levels and other growth initiatives.”
While stock by nature are inherently volatile and unpredictable since their early price action depends heavily on sentiment at the time, prospective participants should note that the market has softened in the offering count. Therefore, FINW stock could stand out from the crowd.
Finally, despite FinWise’s underlying business, FINW shares will not be insured by the Federal Deposit Insurance Corporation or any other governmental agency, per a company statement.
Among the limited options investors have for new public issues in August relative to prior months, FinWise distinguishes itself not only through strong performances during the quarantine season but also for its attractive positioning for the post-COVID new normal.
Though banking competitors may suffer from post-pandemic withdrawal symptoms — that is, losing revenue from crisis-fueled catalysts such as buying homes sight unseen — this threat might not apply to FINW stock. For example, FinWise provides residential and commercial lending services in Salt Lake City, Utah. Just this fact alone might spare FinWise withdrawal symptoms since Salt Lake City is 1 of the top relocation destinations for millennials.
Additionally, the gig economy will surely rise in scope and scale due to younger people challenging standard workplace norms. Coincidentally, Utah features business-friendly laws and regulations. Combined with lower costs of living than other highly demanded and hyped metropolitan areas, FinWise delivers digital acumen with an analog classic: location, location, location.
Finally, an underappreciated component of FinWise’s potential relates to its exposure to small business sub sector concentrations. Per its SEC filings, the company’s top revenue-generating market stems from professional, scientific and technical services, which include valuable services like legal firms. Interestingly, the boom in the gig economy itself will spark greater demand for professional services, considering that tax profiles for employees and independent contractors vary substantially.
Moreover, FinWise has less exposure to cyclical or difficult-to-predict markets like clothing and fashion accessory stores. Thus, when demand structures invariably return to normal following the pandemic, FinWise will already be positioned for long-term success.
How to Buy FinWise (FINW) Stock
If you already know how to buy stocks. If you don’t, just follow the steps below.
Step 1: Pick a brokerage.
While brokers in prior generations competed on price, nowadays the underlying industry standardized incentives such as commission-free trading. Therefore, you should instead focus on attributes such as platform convenience and financial access. For example, certain brokers open doors for their members to buy select pre-IPO shares or new issues at their initial offering price.
Step 2: Decide how many shares you want.
Risk management is vital to success in the financial markets and 1 of the best strategies to deploy is the share count. Pick a balanced number that gives solid reward potential but won’t devastate your portfolio if the investment flounders.
Step 3: Choose your order type.
Before moving forward, review these market concepts.
- Bid: The highest price a buyer will offer, the bid is always lower than the ask.
- Ask: The lowest price a seller will agree to, the ask is always higher than the bid.
- Spread: Mainly the difference between the bid and ask price, the spread serves as a secondary signal of market liquidity and risk. Tighter spreads imply higher liquidity and lower risk, while the opposite is true for wider spreads.
- Limit order: Deploy limit orders to request trades at specific prices. This method offers price transparency but no execution guarantees.
- Market order: On the flip side, market orders guarantee fulfillment but at the prevailing rate, which may vary depending on conditions at the time.
- Stop-loss order: A protective method for your portfolio, a stop-loss order automatically exits your position at either a predetermined price or anything lower.
- Stop-limit order: In contrast, stop-limit orders only execute at a predetermined rate, eliminating price ambiguities. However, such orders carry the same non-fulfillment risk as limit orders.
Step 4: Execute your trade.
To execute a market order, follow these steps:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
Poised for Post-Pandemic Success
As a community-inspired financial institution with significant fintech cred, FinWise Bancorp was already supremely relevant before the pandemic changed everything. Following the public health crisis, FINW stock looks even better as a long-term investment, with the underlying company positioning itself for success via its prime location and an expansive portfolio of financial products.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.