The mind-blowing collapse of FTX-linked stocks ??; Checkout.com’s valuation cut by 72% ??

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???Hey,?Linas here!?Welcome to a????weekly free edition????of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.

If you’re not a subscriber, here’s what you missed this week:

1. Visa knows that Africa is the world's next superpower. You should pay attention too??
2. Walmart is going deeper into FinTech & bringing BNPL product in-house ??
3. Robinhood wants to be with you until your Last Dance??
4. RIP Marcus? Goldman Sachs’ FinTech ambitions are fading ??
5. Starbucks is the ultimate Web3 disruptor ????
6. Galileo's latest feature proves what many still ignore about BNPL??
7. Microsoft & London Stock Exchange — a marriage made in Heaven? ??
8. Mastercard & Marqeta are making a major push into B2B payments ??
9. Global venture funding is in freefall ??
10. PayPal + MetaMask ?? = ??

and more! Don't miss out and join the community here????

Last week (12-16 December) was another super thrilling and hot week in FinTech.?We will look at the mind-blowing collapse of FTX-linked stocks; Checkout.com’s valuation which has been cut by 72%, and other interesting news and developments.

Without further ado, let us dive into what happened in the financial technology sector last week. Let’s connect the dots.

The mindblowing collapse of FTX-linked stocks ??

Following the money ???The sun was just beginning to rise again when the new reports started to emerge. The contagion continues ??

I have written quite a few times about how big FTX ’s tentacles are ?? In addition to hundreds of startups and some of the most prominent crypto firms, they apparently got to stocks too. FTX-linked stocks, which had been on a seemingly unstoppable rise, are now collapsing in a mindblowing display of market turbulence.

One by one ???The elephant in the room?- Silvergate Bank. The largest crypto bank in the US and one of the few allowing customers to move fiat currencies onto crypto exchanges, has lost a whopping 60% of its value since the start of November, according to Kaiko. For the perspective, earlier this year, Silvergate ?managed?more than $16B in assets (up from less than $1B in 2019, so 16X growth ??).

In case you missed it, Silvergate was accepting FTX and Alameda deposits and processing wire transfers for companies and individuals to the exchange. It was heavily criticized for that, and now it seems that the market is punished it badly.

As you can see from the above graph,?Galaxy Digital?and?CoinShares, which both had a multi-million exposure to the fallen exchange, are also down quite a bit (35% to be exact). Yet, they have seen their share prices stabilize in December while Silvergate is still in freefall.?Ouch???

Zooming out ???But it’s not only the companies that had a direct or close relationship with a fallen FTX that are suffering. In essence, pretty much every public company that has exposure to cryptocurrency is down, and often down badly. Examples here could be the regulated lenders with ties to the crypto industry such as?Provident Bancorp?and?Signature Bank. They recently announced?losses?and plans to significantly?reduce?their crypto exposure.

This isn’t surprising at all given both banks are down around 60% in the public markets. For the perspective, that’s 2-4X more than traditional, old-school banks (though, even they have some exposure to crypto i.e. 摩根大通 ). That tells you a lot.

?? THE TAKEAWAY

So what does this mean? ???First and foremost, we already know that FTX's sudden collapse presents a larger reputational problem for crypto. Then there’s also a crypto contagion risk stemming from the meltdown (that’s already happening though on a somewhat small scale now). More importantly, as you can see from the above-presented cases, FTX has clearly sent shockwaves through the traditional financial world too, especially those with direct exposure to crypto. Billions of dollars had been wiped out in a matter of days and months. The worst part? The situation might only worsen before it gets better.

Bonus: The FTX story just keeps getting crazier ??

In case you missed it: The FTX story is getting wilder and wilder ??

FTX is much worse than anyone imagined ??????

The aftermath of the FTX collapse could be bigger than the earthquake ??

Contagion of contagion, or how Genesis could cause Crypto Armageddon ??

WTF: Binance walks away from FTX takeover ????

Checkout.com’s valuation cut by 72% ??

The news ???One of Europe’s most valuable FinTechs?Checkout.com?has just slashed its internal valuation to $11 billion. That’s a massive drop compared to the $40B price tag that the company reached a little less than a year ago.

For context, Checkout.com in January almost tripled its value to external investors to $40B on the back of a whopping $1B Series D funding round.

More on this ???According to Financial Times, the payments FinTech is doing the?adjustment?in an effort to galvanize the workforce. The firm thus is lowering the price at which employees can exercise their stock options (and effectively - the potential upside), from $252 a share to $65 a share under the new internal tax valuation - which is separate from the investor-determined valuation

In that sense, Checkout.com seem to be similar to payments giant Stripe (which is also Checkout.com’s competition). The latter this summer lowered its own internal valuation to around $74B from $95B.

?? THE TAKEAWAY

What does this mean? ???In short, not much. This year more than in any prior year we have learned that valuations are mostly vanity metrics. Zooming out, this move together with Klarna’s valuation collapse is the ultimate illustration of how brutal 2022 was for startups. Especially those in FinTech. But there’s a reason for that, so let’s look at some numbers. According to currently available data, Checkout.com’s $40B valuation implied a whopping 79x multiple on its estimated 2020 global revenues. That’s pretty nuts when you think about it… Meanwhile, FinTech giant Adyen, whose performance is a useful barometer for making sense of this multiple, was trading at a roughly 39x revenue multiple at the time. With that in mind, a 39x multiple for Checkout.com would suggest a valuation of $9.87B. Seems pretty close to where we are now ?? Expect more companies to follow this route. Otherwise, layoffs, M&As, and bankruptcies are inevitable.

Bonus: Stripe slashes internal valuation from $95B to $74B ?? What does it mean?

Extra Reads & Quick Bites for Curious Minds??

• Transaction business ???Crypto exchange giant Binance generates 90% of its revenue from transaction fees, CEO Changpeng?Zhao said in an?interview with TechCrunch. Zhao added that Binance had removed all ads from the data site?CoinMarketCap, which it acquired in 2020, to make for a cleaner experience. "We can turn that back on, that’ll give us $40M a year. But we don’t need to today," Zhao said. It is estimated that Binance had?about $20B?in revenue in 2021, according to a Bloomberg analysis.?So DeFi is the ultimate Binance killer then?????Read?this?and decide.
• Crypto, corruption & EU???? Eva Kaili, one of crypto's biggest fans in the European parliament, was arrested in a corruption probe involving Qatari influence peddling. Kaili, vice-president of the parliament, was expected to lead the European Parliament’s?report?on NFTs and contributed to the DLT Pilot Regime?project, launching in March, as per The Block. She has played a major role in shaping policy on crypto assets and blockchain since 2018.?Seems it’s always about the money…

Money Moves??

• Shibuya, a decentralized video platform co-founded by Emily Yang, aka. pplpleasr,?raised $6.9M?in seed funding.
• 9fin, an analytics platform for debt capital markets, has announced a $23M Series A+ led by new investor?Spark Capital.

Continue reading by subscribing to?Linas's Newsletter.?You will receive fresh news about FinTech with hot takeaways every day.

P.S.?You might enjoy my earlier pieces as well:

?? The Perfect Pitch Deck: How Coinbase Raised Seed Capital and Began Journey Towards $100B Worth Public Company

???A Wise pitch deck that led to London’s biggest and most successful direct listing ever

?? Lessons FinTechs can learn from Spotify going into audiobooks ??

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About: I am?a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading the company's expansion into Europe, I'm an active member of the FinTech community and a TechFin evangelist.

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