Upstart Shares Plunge 31% on Reduced Lending Demand
The FinTech IPO Index experienced an 8% loss for the week due to the underperformance of lenders and platforms. However, the group remained in positive state till today, with a 24.6% rise.
One of the decliners in the FinTech stock was Affirm, which reported a 17% loss on Thursday. The company’s earnings revealed that growth rates are decelerating as consumers pull back on spending, leading to various challenges during its growth. Due to certain circumstances, Affirm had to adjust its operations, leading to a reduction in staff and the discontinuation of its cryptocurrency project.
During the second quarter of FY 2023, there was a 27% growth in gross merchandise volumes, compared to a rate of 115% from the previous year. Meanwhile, active consumers increased by 39% to 15.6 million, compared to 150% growth in the same period the previous year.
The decrease in growth was attributed by Affirm’s management to customers taking time to process their pandemic purchases, resulting in a reduction in workforce of 19%. Upstart, which lost 31% over the past 5 sessions, cut 365 employees due to decreased demand for loans. The development of the company’s small business loan product was suspended until the macroeconomic conditions improved.
Bill.com’s expected slowdown in third-quarter revenue growth resulted in a 24.3% decrease last week, despite a 49% year-over-year increase in transaction fee revenues and core subscription. Meanwhile, Robinhood experienced a 9.5% loss, with a decrease of 800,000 active users during Q4, and transaction revenues sequentially declining by 11%.
The stock prices of NCino, MoneyLion Inc., and Toast fell by 6%, 13%, and 7.7% respectively. The declines are linked to reduced demand for lending and a pullback in consumer spending, leading companies to right-size operations with staff cuts and initiative closures. Despite the turbulence, the FinTech space remains positive year-to-date.
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