DEEP DIVE

MoneyLion

What is up WTFintech nation! Shoutout to Nicole for giving me the mic for today.

Below, we are going to be breaking down MoneyLion, the consumer-driven FinTech platform. Here are some key facts about the company: 

Key Facts: 

• Provides consumers with mobile banking, cash advance, crypto investing, loans, and more 
• Company was co-founded by CEO Dee Choubey and CTO Chee Mun Foong in 2013
• Currently has 3.3M users at an average revenue per user (ARPU) of $70
• The company raised ~$225M in the private markets and raised $526M via SPAC in 2021. 

The company went public via SPAC in September of 2021 at a $2.4B valuation. What was once a killer exit for founders is now looking quite less SPACtacular as the stock is down more than 80%!!!

What the heck happened? 

Well, first, let’s check out how the company performed as a business in 2021.

Your eyes aren’t lying to you. They crushed it. 

• Revenue grew 117% YoY
• Gross Margins improved a whopping 12%
• Total # of customers grew from 1.4M to 3.3M

The company also expects their momentum to continue into 2022: 

• Revenue: $325 – $335M 
• Gross Margins: 60-65%
• EBITDA: ($45M-$50M)

So if the company is firing on all cylinders, why did this stock crash faster than Kim and Kanye’s marriage? This time it wasn’t Kanye’s fault, but rather some crazy macroeconomic factors that include: 

1. Speculativeness of SPACs
2. Rising interest rates
3. Sky-high inflation 
4. Collapse of growth stocks/non profitable companies

MoneyLion is not the only FinTech company seeing their stock price nailed since 2021 highs:

• Coinbase: (80%)
• PayPal: (75%)
• Affirm: (85%)
• Square/Block: (70%)

It is a tough time in the markets for many, but FinTech has been hit especially hard. 

The Future

What does the future hold for MoneyLion? 

From a business perspective, the company should keep on course and continue to execute. One component of their strategy to keep an eye on is how they integrate Malka Media, a creator network and media platform that MoneyLion acquired in late 2021 for $75M. The company is looking to fuse their banking capabilities with curated and powerful content to make their platform the #1 choice for the next gen consumer. 

From a stock perspective, the destiny of the stock will likely be tied to so many of the macro forces mentioned above. However, if MoneyLion can continue to execute, they could break themselves from the shackles of their peers and environmental forces. 

Why? Valuation. 

With the stock ~$2 a share and a ~$350M Enterprise value, the company is trading at just 2x its 2021 sales and ~1x its 2022 sales — a seemingly dirt cheap valuation for a company with 60%-65% gross margins, and adding millions of subscribers annually. 

For all of you FinTech fanatics, MoneyLion is definitely one too watch! If you want more breakdowns like these sent right to your inbox, make sure to sign up for my new newsletter “The Crossover” using this link here!

Talk soon, 

Alan

IN THE NEWS

Barron’s columnist Eric J. Savitz wrote a piece in this past week’s edition titled “The Tech Selloff is Causing Big Problems For Startups Too.” 

TL;DR: The tech selloff has hurt VCs greatly, the IPO market is collapsing, and private valuations are starting to shrink. 

3 Key Stats: 

• NASDAQ composite index down 27% this year 
• Last month, Softbank announced that they have lost $27B across their 3 large venture funds 
• There have only been 34 IPOs in the US market in 2022, down 78% from this point last year 

Key Quote: 

“Forge Global CEO Kelly Rodriques… notes that private transactions in pre-IPO shares still take place at prices above the last completed financing round – but the premium is shrinking. The average secondary transaction in this first quarter came at a 24% premium to the last round, according to Forge, down from a 58% average premium in the fourth quarter.”

If I could short the “premium to last round” percentage, I would. Two reasons: 

1. Inflated Valuations: As the inflated valuations of private companies’ last rounds become more and more clear, no one will (or at least no one should want to) touch these companies. Phenomenal, hot, VC-backed companies that IPO’d like Peloton, Chewy, and DoorDash are all down more than 50%. It is only a matter of time until this hits the secondary transaction markets too. 
2. Liquidity: Not only are the valuations off, but the liquidity in the private markets will continue to dry up. When you invest in the pre-IPO markets, you are likely banking on an IPO over the next couple of years, however, many many companies will not be looking to do so (eToro, FTX), which means that you are dependent on a Forge-like platform for liquidity — which is a dangerous bet, especially in a rough macro environment.

CHART OF THE DAY

Robinhood’s MAU Disaster

• Robinhood has a serious problem on their hands as MAU’s are down ~5.5M in just 3 quarters. 
• The stock is down ~90% since ATHs but with the market going down and trading become less fun, $HOOD’s problems might just be getting started
• Something else to watch: $127M out of $218M Q1 revenues are from options trading. I anticipate that options will become less and less common over the coming months for the retail investor, which could mean even more trouble for Vlad and co.

GOLDEN NUGGETS

• Top Gun: Maverick: no words. Absolutely incredible. I cannot stop listening to “Hold My Hand,” the amazing song that Lady Gaga created for the film. 
• Check out this letter that Y Combinator sent to their founders a couple weeks back. 
• A walk-off home run to win your state tournament? Inject this video into my veins!
• Congratulations to my Maryland Terrapins on winning the Lacrosse National Championship!

MEME