Flywire IPO: Is the IPO Market Recovering?

Flywire IPO Details and Market Implications

Flywire, a payment processing company headquartered in Boston, finalized its initial public offering (IPO) pricing yesterday evening. A total of 10.44 million shares were sold at $24 each, representing the high end of the previously indicated range of $22 to $24 per share.

This pricing resulted in gross proceeds of $250.6 million for Flywire from the IPO.

Valuation Analysis

Renaissance Capital estimates the company’s fully diluted valuation to be $2.8 billion. Based on the total number of shares outstanding, Flywire’s value at its IPO price is calculated to be $2.4 billion.

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Significance Beyond Financials

The Flywire IPO is noteworthy not only for its financial aspects but also because it represents a successful exit for a Boston-based company. This is a positive development, diversifying away from the concentration of IPOs in New York and San Francisco.

This public offering serves as a valuable benchmark for assessing the overall IPO market. The current year and the preceding one are anticipated to be significant periods for startup and unicorn exits.

Impact on Investment Returns

The performance of these newly public companies directly influences the returns of venture capital funds. Many funds rely on successful public debuts to generate returns for their investors.

Monitoring the IPO process – from filing to listing – allows us to gauge the health of the investment landscape. This impacts a broad range of financial interests, including pension funds and college endowments.

While IPO outcomes aren't always favorable, the initial results for Flywire appear promising.

Insights from Flywire's IPO Regarding the Current Market

Our previous analysis of Flywire involved a global assessment, and utilizing Dutch payments platform Adyen as a comparative benchmark, we suggested a valuation exceeding $2.3 billion was plausible.

We generally adopt a conservative approach when evaluating public market valuations. While our initial estimation of Flywire’s market capitalization was reasonably close, it fell short of the actual diluted figure by approximately $500 million.

This discrepancy is significant. We acknowledge the oversight.

However, this miscalculation highlights the considerable optimism currently present within the tech IPO market, particularly within the fintech sector. The demand for fintech shares in the public market may be exceeding that of other software companies, potentially influenced by Square’s recent strong performance.

The precise reasons remain unclear, but it’s evident that Flywire is currently valued at:

• 21.2 times its 2020 revenue.
• 15.6 times its Q1 2021 annualized revenue.

This valuation is despite gross margins remaining around 61% and a growth rate that is decelerating to approximately 37%!

For context, the average company within the Bessemer Cloud Index demonstrates a growth rate of 32% and is valued at roughly 15 times its annualized revenue. Considering Flywire’s relatively modest gross margins, its IPO valuation aligns with a generally moderate valuation climate; any positive movement post-trading will likely intensify this trend.

This is not intended as criticism of Flywire, which we believe is a well-managed company. However, the multiples achievable for maturing unicorns during an IPO are particularly noteworthy.

This observation leads us back to the broader IPO market: it appears increasingly appealing, suggesting the recent slowdown was temporary, reminiscent of the situation with Snap in 2017.

It’s anticipated that Robinhood will file its S-1 registration statement this week. With today being Wednesday, the timeframe for this filing is narrowing. If Robinhood aims to enter a favorable market, Flywire’s IPO indicates a reasonably receptive environment for listing.

We will provide updates once trading commences, but given the potential for this to occur within hours, we are proceeding with immediate publication. Further discussion will follow shortly!