A mobile app allows commercial banks to offer their clients a specific set of banking operations. The number of traditional "offline" branches and offices was decreasing due to internet banking. The rise of neobanks in the 2010s has accelerated the digitalization of the global banking system. These are companies that don't have traditional "offline" branches. These banks allow their clients to conduct all banking operations via mobile apps, making their lives easier.

Nu Holdings Ltd. is a developer of a digital bank platform and will have an IPO at NYSE before November ends. The shares of the company will trade under the "NU” ticker the following day. We'll be taking a closer look at the company, its strengths, and the risks associated with investing in its shares.

Business of Nu Holdings Ltd.

Nu Holdings Ltd. was established in the Cayman Islands in 2013. Over 5,000 people work for the company. The bank platform is a leader in Brazil, Mexico, and Colombian markets. Nu Holdings Ltd. has approximately 48 million clients around the globe.

These are the key factors that drive the company's growth:

• Technological and economic innovations
• Enhancement of tools to increase client involvement
• Customer support enhancement. The development of robot systems is the main focus. It is our goal to make customer communication with bots easier than with humans.
• Solutions for small- and medium-sized companies

Nu Holdings Ltd. management aims to create a user-friendly application that can be used for daily activities such as saving, investing, loaning, and insurance. The company develops close and friendly relationships with its clients that are mutually beneficial.

The company is now preparing to enter North American and European markets. The business model is well-managed, and has already proven its viability in different jurisdictions. The company has been very successful, and it will continue to grow when it enters new markets.

Nu Holdings Ltd. already has the appropriate departments to expand in the USA, Uruguay, Argentina, Germany and other countries. Let's now discuss the potential market for the company.

Nu Holdings Ltd.'s market share and competition

According to Oliver Wyman Consultoria. Estrategia de Negocios Ltda. estimates that the US target market volume (brokerage and banking services, as well as insurance services) was $99 billion in 2020. It is projected to grow at a rate of 5% per year by 2025.

According to the same report by Oliver Wyman Consultoria the company's global market was $186 billion in 2020. It could reach $269 billion by 2025 with an average annual growth rate 8%. Nu Holdings Ltd. is expected to compete in this sector with traditional banks as well as other fintech start ups. Let's now take a closer look into the financial performance of Nu Holdings Ltd.

Financial performance

Nu Holdings Ltd. filed for an IPO. The company is loss-making. We'll be analyzing its revenue. The company's 2020 sales were $737.1million, which is a 20.42% increase over 2019. Comparing to 2018, 2019 saw a 91.94% increase in revenue.

F-1 reports that the company's revenue in the first nine months of 2021 was $1.06 Billion. This is a 98.67% higher than the same period in 2020. The revenue for the past 12 months was $1.26 trillion. We can see that there is an "explosive” upsurge in company business at this stage.

2020's net loss was $193.2million, which is 49.42% more than in 2019. The net loss for 2020 was $193.2 million. This is a 49.42% increase compared to 2019.

The company could have achieved net profit if it had maintained the revenue growth rate mentioned above. It didn't happen because of an increase in expenses, specifically administrative costs (+119.47%), due to expansion into new markets.

The company has $13.95 billion in cash and cash equivalents, while its total liabilities amount to $169.91 millions. The net cash position now stands at $13.78 billion.

Nu Holdings Ltd.

Let's now look at the strengths and weaknesses of Nu Holdings Ltd. The following are my views on the benefits of investing in shares of the company:

• The company is on the market since more than nine years.
• The average annual growth rate for revenue is 100%.
• The issuer holds a monopoly on the South American digital banking market.
• Over 48 million people use the company's app.
• A flawless business reputation.

I would nominate:

• The issuer is losing-making and does not pay dividends.
• The company will need to spend huge amounts of money to increase brand awareness in new markets.
• Due to Nu Holdings Ltd.'s offshore jurisdiction, western investors might not trust it.

Details and estimates of Nu Holdings Ltd. capitalization

Susquehanna Financial Group, LLLP., Sanford C. Bernstein & Co., LLC, Numis Securities Inc., Nu Invest Corretora de Valores S.A., Allen & Company LLC, HSBC Securities USA Inc., UBS Securities LLC, KeyBanc Capital Markets Inc., Citigroup Global Markets Inc., Goldman Sachs & Co. LLC i Morgan Stanley & Co. LLC.

Nu Holdings Ltd. plans to sell 289.2 millions common shares during the IPO at a price of $10-11 per share. It is estimated that the IPO volume will be $3.03 trillion with a capitalization up to $48.4 billion. It will be the largest IPO in 2021.

The company is losing money so we use the Price-toSales ratio (P/S) to calculate its capitalization. The P/S value of a technological sector in such a fast-growing market could be as high as 40 during the lockup period. The company's pre-IPO P/S value was 38.2. This investment could be considered venture capital if the underwriters don't revise the IPO terms.

If the market conditions are favorable, there is a good chance of an "explosive” surge in capitalization. This is why I recommend this issuer as a short-term investment option for speculative purposes.

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