Chime aims for steep drop in IPO valuation to $11 billion

Chime, the largest digital bank in America, is preparing to launch its initial public offering (IPO) targeting a price between $24 and $26 per share. This anticipated valuation of about $11 billion marks a significant decline from the $25 billion valuation achieved in August 2021 during a peak period of funding for fintech companies. Chime's diluted valuation takes into account the allocation of 59 million shares reserved for employee compensation and its Chime Scholars charity. The company continues to advance its IPO plans despite a turbulent economic landscape exacerbated by tariffs introduced during President Trump's administration. Founded 13 years ago and based in San Francisco, Chime has generated substantial revenue through interchange fees from debit and credit card transactions, charging merchants 1% to 2% for accepting payments. Additionally, Chime is pivoting towards small-dollar lending to further expand its financial services. While it operates without a bank charter, the company partners with institutions like Bancorp and Stride to provide banking services to its customers. Chime's co-founders, Chris Britt and Ryan King, collectively possess a significant amount of voting power, holding approximately 5% and 4% of shares, respectively. Their stakes are valued around $500 million each, with their combined voting power giving them the ability to heavily influence stockholder decisions. The largest shareholder is DST Global, which holds about 12% of Chime on a diluted basis. Notable investors such as Flourish Ventures and Northwestern Mutual plan to sell shares during the public debut, indicating a broader trend among early investors looking to capitalize on Chime's market entry. While the fintech industry faces pressures from economic instability, including stock market volatility, Chime's strategy signals a commitment to proceeding with its IPO. Investors and analysts will be watching closely to see how the market reacts to Chime's public offering and how it navigates the ongoing challenges in the financial sector. The success or struggles of this IPO could have ripple effects throughout the digital banking landscape, affecting perceptions of other similar companies in the sector.