Online bank Chime's implied market capitalization is about 5.7 times its 2024 revenue, almost exactly the same valuation as that of Sofi Technologies

The terms set for Chime Financial Inc.'s upcoming initial public offering would value the neobank, relative to its revenue, close to where its already public rival Sofi Technologies Inc. is being valued, confirming that the once red-hot financial-technology sector has cooled off substantially.

But that's a good thing, because it has made Chime, and the fintech sector, attractive again.

Chime said 32 million shares are being sold in the IPO, including 25.9 million shares from the company and 6.1 million shares from selling stockholders. With an estimated price range of $24 to $26 a share for the IPO, the company could raise up to $673.4 million.

The stock is expected to price as early as Wednesday for its first day of trading Thursday on the Nasdaq under the ticker symbol "CHYM". The lead underwriters of the IPO are Morgan Stanley, Goldman Sachs and JPMorgan.

With a total of 364.4 million shares outstanding after the IPO, the estimated pricing would value Chime at up to $9.47 billion.

That means Chime would go public at a much lower valuation than fintech companies were commanding during the 2021 boom in IPOs, when fintech stock prices rocketed.

Chime's projected market capitalization is about 5.7 times its 2024 revenue of $1.67 billion.

In late 2021, Chime rival SoFi's stock $(SOFI)$ was trading at nearly $23 a share with a market cap of about $17.9 billion, or roughly 24 times the company's full-year 2021 revenue of $738 million. More recently, the stock was trading at less than $14 a share with a market cap of about $15 billion, or about 5.6 times 2024 revenue of $2.67 billion.

"These companies have called themselves technology providers because they've wanted to be valued like that, but now valuations are getting closer to those of traditional financial companies," Reena Aggarwal, director of the Georgetown University Psaros Center for Financial Markets and Policy, told MarketWatch.

Technology companies tend to carry higher valuations than financial companies. For example, at the end of the first quarter, the market cap of Microsoft Corp., which is currently the mostly highly valued tech company, was 10.3 times total revenue over the previous 12 months. The mostly highly valued bank, JPMorgan Chase & Co., had a market cap of 3.7 times revenue.

Public and private valuations of fintech companies dropped sharply in 2022 and have been fighting their way back to levels where Wall Street bankers and company executive feel more confident about taking companies public.

Over this period, fintech companies have matured and offer more in the way of net income and revenue than they did three or four years ago.

Chime had started to generate an IPO buzz in 2021, but as stocks in the sector moved sharply lower in early 2022, the opportunity to go public dried up. Since then, Chime has built up a profitable business with 8.6 million active members.

At current valuations, investors now appear to be much more receptive to IPOs of fintech companies such as Chime.

"Despite the general market volatility, there's an opening for them," Aggarwal said.

EToro Group Ltd.'s stock $(ETOR)$ began trading on May 14 as the first major IPO from a fintech company since 2021. The stock was recently trading at about 20% above its $52 IPO price.

Along with SoFi, Chime also competes against traditional financial-services firms such as JPMorgan Chase and Bank of America Corp, as well as against fintech firms including Affirm Holdings Inc.$, PayPal Holdings Inc. and buy-now-pay-later specialist Klarna Group PLC, which has filed for an IPO but not yet set its estimated price range.

Chime reported net income of $12.94 million and revenue of $518.74 million in the three months that ended March 31, while in the year-ago quarter it reported net income of $15.9 million on $391.97 million in revenue.

Aggarwal said Chime has set itself apart by focusing on people with incomes of up to $100,000 a year, while banks appear to be more interested in wealthier people.

"They have a niche that the bigger banks don't," she said. "They're also not regulated like a bank, so that's an advantage for them as well."

Chime's financial backers include DST Global, Crosslink Capital, AI Bells, General Atlantic and Menlo Ventures.

Circle Internet ups price range and size of IPO

In another bullish sign for fintech IPOs, stablecoin issuer Circle Internet Group $(CRCL.UK)$ on Monday increased both the offering size and the estimated price range of its IPO.

It now plans to offer 32 million shares at an estimate price range of $27 to $28 a share, for IPO proceeds up to $896 million.

Earlier it had planned to offer 24 million shares at $24 to $26 a share for proceeds up to $624 million.

The stock is expected to begin trading later this week under the symbol "CRCL" on the New York Stock Exchange.

Famed investor Cathie Wood's ARK Investment Management LLC has indicated an interest to buy up to $150 million in Circle's Class A common stock at the IPO price.