Hello, Global Investors,
I think before we start this piece, we should acknowledge the scandal Nubank went through since part 1 was released. In a way I’m glad I took so much time to publish part 2, since Nubank had a hell of a time and it’s in a different situation since its much awaited IPO.
Besides Tech Stocks being obliterated by the new market conditions, Nubank had some controversy of its own, which helped the stock being 65% down its high since the writing of this article.
The controversy started in may when Nubank announced a bizarre ramp up in executives salaries, making them the highest paid bank execs in Latin America. That rightfully brought up a ton of critics and scared investors. Nubank even created an “Adjusted Income” metric in their last earnings, that was actually adjusted by the ramp up in salaries. They actually would be net income positive if they didn’t give out those huge payoffs, so yeah not a good look.
Anyway, I still think Nubank is worthy of more pieces, since it’s still a fine business with much potential. I’d be lying if I said this recent situation isn’t a huge red flag for me, even so, I think we can still find a good Risk/Reward relation in Nubank, at the right price.
The series will now be a 3 part, where I’ll focus exclusively on numbers for this second one and then Valuation and Risks for Part 3.
So let’s start.