Wall Street Sours on Subprime FinTechs as FinTech IPO Index Loses 1.7%

Like the rest of the global economy, the FinTech IPO Index can be boiled down to a word: uncertain.

Despite some notable performances from Oportun and OneConnect, the majority of the companies in the index took single-digit percentage stock price hits, leading the overall index down for the week by 1.7%. For the month, the index is up 9.5%, and YTD, it’s up almost 80%.

The negative side of the ledger was dominated by companies that extend financial services products to underserved consumers and businesses. They were led by OppFi, which took a 21% reduction in its stock price despite securing an increase in its revolving credit facility.

The Chicago-based company is a financial platform that partners with community banks to extend credit to lower-income Americans. It announced Tuesday (Feb. 18) that it has increased its revolving credit facility with affiliates of Blue Owl Capital Inc. to $300 million, marking an increase from the previous $250 million.

Why the punishment on Wall Street? Hard to say. As detailed in Barchart.com, the company has a solid business model and financials.

“Since the pandemic, there has been a significant rise in demand for digital banks, which are more customer-friendly and serve historically underserved banking consumers (subprime and non-prime customers),” Barchart said Tuesday (Feb. 18). “These customers provide a considerable credit opportunity and are the primary target of multiple neo-banks. Per OppFi, there are nearly 60 million U.S. consumers who are credit marginalized. This shows the large market opportunity that the company can cash in on.”

OppFi was joined in the negative column by high-profile financial literacy and consumer credit connector site NerdWallet, which saw a 16% drop.

Like OppFi, it comes on the heels of positive news: an earnings report in which it reported a 37% year-over-year revenue increase to $183.8 million in its fourth quarter, fueled by explosive growth in its insurance vertical and stronger banking performance, though persistent challenges in credit card and lending markets offset some gains.

The personal finance platform saw insurance revenue — newly categorized as a standalone segment — surge 821% to $72 million as auto insurance partnerships expanded, while credit card revenue fell 19% amid ongoing organic search traffic declines and lending revenue dropped 26% due to rising interest rates.

Chief Executive Tim Chen hailed the results as exceeding expectations, stating: “We remain focused on growing cycle-to-cycle and are making strategic investments to drive direct, engaged relationships with consumers to make progress toward our vision in 2025.”

And finally, Upstart completed the double-digit drops for the paycheck-to-paycheck economy on the index this week.

It dropped 10.7% on news that was largely positive after announcing that it has added another credit union to its roster. Massachusetts-based Holyoke Credit Union announced its Upstart deal on Wednesday (Feb. 19). The stock drop could be tied to the general souring on underserved consumer credit because most analysts came up positive on Upstart.

“Upstart’s AI models, which incorporate over 1,000 variables and analyze billions of data points, provide a sophisticated approach to credit assessment that can help maintain loan quality while expanding access to credit,” said StockTitan. “While individual credit union partnerships may not significantly move the needle on Upstart’s quarterly earnings, the cumulative effect of building out this network creates a powerful moat. Each new partnership enhances the platform’s data advantages and creates network effects that make the service more valuable to both borrowers and lenders. The strategic value lies in the scalability of these partnerships and their contribution to Upstart’s long-term vision of transforming credit access through AI.”