Adyen's Soaring Shares Jolt Europe's Fledgling Fintech Scene

(Bloomberg) -- A tech company skyrockets on its first day of trading, making its founder an instant billionaire and showering its venture capitalist backers with profits: it’s the stuff Silicon Valley dreams are made of.

But on Wednesday, it wasn’t a California startup that hit the jackpot -- it was Adyen NV, a previously obscure Dutch fintech that processes payments for the likes of Netflix Inc. and Spotify Technology SA. Adyen’s shares more than doubled in its trading debut in Amsterdam before closing at a 90 percent gain, giving the company a market value of 13.4 billion euros ($15.8 billion) -- more than Commerzbank AG, Germany’s second-biggest lender.

On Thursday, Adyen held that advance and added 3 percent more. For the European tech scene, which has seen few initial public offerings of tech firms since the heyday of the dot-com boom two decades ago, a good dose of euphoria was suddenly in order.

“We need European tech companies to be IPO’ing, rather than abandoning their missions and selling out to American companies,” said Michael Jackson of Mangrove Capital Partners in Luxembourg. “This proves that there is an IPO route for European companies, not just an acquisition one.”

Few Sellers

About 25 top institutional investors got 75 percent of the deal, according to people familiar with the deal who asked not to be identified. Monday’s stock pop was also driven by the fact that trading was not very liquid, with few sellers on the secondary market relative to the amount of buyers.

The unexpected windfall demonstrates how hungry the marketplace is for alternatives to traditional European banks, many of which are still struggling to find their footing a decade after the financial crisis, let alone leading innovation. Yet Adyen’s IPO also raises important questions for investors, as well as entrepreneurs. For starters, is this a one-off, or the beginning of the long-heralded moment when a new breed of financial enterprise starts truly challenging the establishment?

There’s a good argument to make for the former. For 12 years, Adyen, which means “start over again” in Surinamese, has painstakingly built its business in the highly regulated payments industry with a combination of high-grade engineering and patience. Adyen made it easier and cheaper for merchants to process e-commerce payments as well as purchases made in stores, but it also provided them with tools to analyze payment data so they can tailor new offerings to their customers.

Premium Product

This level of data management, long coveted by banks and credit-card companies, set Adyen apart, allowing it to charge merchants a premium for its service. In 2017, the firm earned 71.3 million euros on more than 1 billion euros in revenue, a 112 percent jump from 2015. This year, Adyen won EBay Inc. as a customer -- a shock, given that the Dutch firm displaced its new client’s former subsidiary, PayPal Holdings Inc.

“I think it shows both how long a road it can be to build a strong company, but also how big the reward is,” said Rick Yang, a partner at the venture-capital firm NEA in Silicon Valley, who manages a number of fintech investments.

Fintech Flurry

The IPO comes amid a flurry of deals in the European technology sector. Funding Circle Ltd., the No. 1 peer-to-peer lender in the U.K. with 4.5 billion pounds ($6 billion) in cumulative volume, is preparing for its own IPO later this year. Last month, PayPal acquired Swedish payments processor iZettle, whose card readers are popular with cafes and pop-up retailers in London, for $2.2 billion.

Just this week, attendees at MoneyConf, a big European fintech confab in Dublin, were buzzing that fintech unicorn TransferWise Ltd. and other rising names such as WorldRemit Ltd. and German digital bank N26 may also be primed for eventual IPOs. Kristo Kaarmann, TransferWise’s-co-founder and CEO, told Bloomberg News the company is not considering an offering at this time.

Adyen’s IPO made a billionaire of 50-year-old founder Arnout Schuijff, with the newly minted wealth of his brother Joost and co-founder and CEO Pieter van der Does not far behind. If the shares hold onto their gains in the weeks to come, that could reset the expectations, and perhaps the timetables, of fintech firms from London to Paris to Berlin.

“It’s been 20 years since PayPal changed the payments industry, but what the performance of Adyen tells us is that we are still at the beginning of this story,” said Laurent Nizri, the CEO of the Paris Fintech Forum, which runs a major annual conference. “But we have to be cautious any time a company doubles its value so quickly.”

©2018 Bloomberg L.P.

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