NerdWallet Files for IPO at Toned Down Valuation—Looks Like a Good Buy

San Francisco-based personal finance company NerdWallet has filed for an IPO and will list under the ticker symbol “NRDS.” The company provides advice on personal finance. The app is popular because it compares different financial products. What’s the IPO date and price and is it worth it at the current valuation?

NerdWallet was founded in 2009 when Tim Chen, who lost his job in the financial crisis, identified the need for unbiased and free financial advice. He was searching for a good credit card for an expat in Australia. Jacob Gibson is the other co-founder of the company. NerdWallet has a motto to provide trustworthy financial advice to individuals and SMBs (small and medium businesses).

NerdWallet hasn’t specified the IPO date yet, but it's expected to list before the end of 2021. The company has kept the IPO price range between $17 and $19 and the final pricing will be announced later.

NerdWallet is offering 7.25 million Class A shares as part of the IPO and the underwriters have an option to purchase another 1.08 million shares. The company would raise over $158 million in gross from the IPO at the upper range if the underwriting option is fully exercised. NerdWallet intends to use the funds for general corporate purposes and also to repay some promissory notes.

A total of 33 million Class A shares and 31.6 million Class B shares would be outstanding after the offering. There are other dilutive securities including stock options. The Class B shares have higher voting powers. Chen and entities associated with him would hold over 90 percent of the company after the IPO.

Looking at the upper end of the IPO price and the outstanding share count after the IPO, NerdWallet would command an initial valuation of just above $1.2 billion. That’s only a fraction of the $5 billion valuation that the company was rumored to seek previously. Meanwhile, the $5 billion price tag looked too steep for the company based on its financials.

NerdWallet reported revenues of $245.3 million in 2020, which was 7.4 percent higher than the previous year. The company’s performance was impacted negatively due to the COVID-19 pandemic in 2020. However, growth has picked up and in the first nine months of 2021, it has reported revenues of $280.1 million. The revenues have increased 48 percent over the corresponding period last year and have already surpassed the full year 2020 revenues.

NerdWallet has had a mixed performance on operating profits. The company posted an operating profit of $28.4 million in 2019, which fell to $1.9 million in 2020 amid the COVID-19 pandemic. However, the company has posted an operating loss of $29.6 million in the first nine months of 2021.

NerdWallet’s valuations look much more reasonable at the IPO price point. The stock would be available at around 5x its trailing sales, which are way below other fintech companies.

Fintech companies have seen a valuation multiple rerating this year. Affirm listed at a significant premium to its private market valuation. While SoFi, which went public through a SPAC merger, has been volatile, it still trades at almost twice the SPAC IPO price of $10.

NerdWallet is a trusted and go-to website for a lot of individuals looking for sound financial advice on the internet. The IPO looks like a good buy despite the recent operating losses.