The PayPal emblem displayed on a smartphone display with a inventory market graphic in the background.
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Billionaire investor J. Christopher Flowers is nervous there’s a bubble rising in the monetary know-how market.
“I think there are a lot of indicators that there is a bubble” in fintech, Flowers, CEO of funding agency J.C. Flowers & Co, instructed CNBC’s Annette Weisbach in an interview.
Fintech firms have seen their market values soar in each the private and non-private markets over the previous 12 months, with some companies buying and selling at greater valuations than main banks.
PayPal, for instance, has a market cap of $242 billion, greater than that of Wells Fargo or Citigroup. Square, the fintech enterprise of Twitter CEO Jack Dorsey, is price almost $107 billion, greater than U.S. Bancorp.
Among privately-held firms, Stripe was final valued at an eye-watering $95 billion.
“If you look at traditional — or even not so traditional — valuation metrics, many companies trade at 10 times what a normal company would trade at for that kind of thing,” Flowers stated.
“There are also many examples of companies which really aren’t very good trading at high valuations,” he added, with out naming any names. “It’s a mixed bag. There’s a lot of fluff out there.”
Investors have flocked to high-growth firms at a time when rates of interest are at historic lows and cash is low cost. Fintechs have additionally benefited from a surge in demand for on-line providers throughout the coronavirus pandemic.
Still, Flowers thinks there’s cash to be made in the sector.
“On the other hand, there’s also many interesting trends and opportunities in fintech as well,” he stated.
Investors ought to concentrate on firms in the funds sector moderately than lending companies, Flowers stated. Market gamers also needs to again worthwhile fintechs over loss-making ones, he added.
“Companies that make money, at least on a unit basis … are a lot more interesting than ones that say they’re going to make money but actually lose money,” he stated.
Flowers, 64, started his profession at Goldman Sachs earlier than founding his personal fairness agency J.C. Flowers & Co in 1998.
He is maybe finest identified for his function in the 2008 monetary disaster, having helped advise Bank of America and Merrill Lynch on their merger. According to Forbes, Flowers’ internet price is $1.2 billion.