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Chime

Leading digital bank in US
Pre-IPO
Medium risk

Revenues in 2018-2020

Invest in Chime

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Investment Idea Details
About the company

Chime is the largest digital bank in the US. Chime Bank is also a branch-less mobile bank that allows users to access its services through an app. Customer’s Chime spending account and savings account come with a free Visa debit card. With the Chime mobile application, you can control your savings, account balances and transactions, instantly transfer money to your friends, deposit paper checks by photo and much more.

Unlike traditional bank accounts, there are no monthly account fees and minimum balance requirements, overdraft is fee-free. Chime doesn’t profit off of customers. Every time a customer uses his Chime debit card, Chime earns a small amount from Visa paid by the merchant.

Market Opportunities

Nearly 2 billion people in the world don’t have access to banking services. Digital banks represent a powerful tool for advancing financial inclusion, helping more and more people to manage their money effectively. According to Pitchbook, by the end of 2020 digital banks will be serving 60 million people across North America and Europe. By 2024, the number of customers choosing digital banking products will exceed 145 million.

In 2018, the global digital banking market was valued at $804 billion and is expected to reach $1.6 trillion by 2027, growing at a CAGR of 9%. In 2019, the digital banking market in North America was valued at $376 billion and is predicted to reach $721 billion by 2027, growing at a CAGR of 8.3%.

Risks

Long-term activity risk. Chime is a leading digital bank, but it faces intense competition in the market. Chime's top competitors include SoFi, Moven, Varo Money, Cash App. Also, companies from other segments may foray into the digital banking market. Apple has launched its new iPhone-integrated credit card, registering 3 million credit cards within the first year.

Overestimated market valuation. Digital banking is relatively young, there is a risk that analysts and venture investors are overestimating the industry’s growth potential. Chime hasn’t disclosed its financial statements. It is unclear if it shows any tendency toward profitability.

Financials and Valuation

In 2019, Chime reached nearly $200 million in revenue, a fourfold increase over 2018, according to Forbes ($300 million according to CNBC). Chime CEO Chris Britt said that the company has more than tripled its transaction volume and revenue this year and has become profitable on an EBITDA basis. Chime is expected to reach $1.5 billion in revenue in 2021.

In September 2019 Chime Bank served 5 million customers, in February 2020 — 8 million. Given Chime's capitalization growth and its CEO's statement about revenue growth, we assume that the company has about 15 million customers.

Investors: Yuri Milner's DST Global, Tiger, ICONIQ, General Atlantic, Dragoneer and hedge funds investing in public and private firms. Major public funds believe in Chime, which suggests that it’s close to IPO. According to Chime’s CEO, Chime will be ready for IPO within the next 12 months.

Similar companies: Square (SQ) and PayPal (PYPL). Square’s capitalization is $78 billion, P/S = 13x, revenue grows by 64%. PayPal has a $225 billion market capitalization, P/S = 12x, revenue grows by 22%. Given Chime’s growth indicators, its value may reach $30 billion after the company goes public. Expected return on investment — 85%.

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Publication
12 Nov
Minimum Amount
1 share
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Public Offering Date
Pending
Estimated Gains
+85%
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Exit
̴ 2021
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Risks

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  • Illiquidity. There is a possibility that early exit from this investment will take more than 1 month.
  • Asymmetric information. Management and current investors have access to more internal information about the company than other market participants.
  • Time uncertainty. There is no information regarding next financing round or exit strategy timeframe (IPO or M&A).
  • Share dilution. The issue of additional shares by a company may reduce the value of shares of existing investors.

Invest in Chime

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