As the fear of recession loomed large with Trump’s newly imposed ‘reciprocal tariffs’, the US stock market experienced the worst share drops. Major fintech companies, including Affirm, PayPal, SoFi, and Upstart, also experienced two consecutive days of decline as below:
Affirm | 12% | 28% | $34.17 |
PayPal | 3.50% | 11% | $59.57 |
|---|---|---|---|
SoFi | 4.70% | 11% | $7.23 |
Upstart | 5.20% | 12% | $25.86 |
James Ulan, the director of research, emerging technology at PitchBook, stated
"A recession typically hits nice-to-have mass-market consumer businesses, including fintechs, harder than other sectors because the first group to pull back spending in a recession is lower-income consumers"
Why Such a Decline?
From an investor’s point of view, the newly imposed tariffs will create uncertainty in the market. Inflation will slow down consumer spending, leading companies to lay off and lower production.
Most of the fintech companies like Affirm and Robinhood are dependent on consumers to repay loans and deploy extra income toward stocks and investments. They also earn fees from credit card and debit card purchases, which reduces during the inflation period. Such uncertainties cause a decline in fintech companies’ stocks.
Delay in IPO
An Initial Public Offering (IPO) is a private company’s initial sale of shares to the public to become publicly traded for fundraising. Fintech companies like Klarna and StubHub are delaying IPO after Trump’s tariffs. Klara postponed its meeting with investors due to a volatile market. Both companies are unsure of providing a timeline.
StubHub also delayed a meeting in March with investors, considering the long-awaited Trump’s tariffs and the expected stock shock in the US market.
Global Fintech Companies
As the new wave of tariffs has created uncertainty in the US market, it will have long-term repercussions for the US economy. Fintech companies that mainly operate in the domestic market may absorb the tariff shocks, relying on a watch-and-see policy, however, those reliant on global transactions would be greatly affected as the tariffs have global implications, including trade wars.
