Allianz puts N26 stake up for sale at steep discount

Allianz has put its stake of about 5 per cent in struggling fintech N26 up for sale at a steep discount that underlines the speed at which high-growth start-ups have fallen out of favour with investors.

The venture capital arm of the Munich insurance group Allianz X has mandated an adviser to offer its stake in N26 at a valuation of $3 billion (€2.7 billion), people familiar with the matter said.

That is a discount of about 68 per cent to the $9 billion that investors thought the company was worth during its last funding round in October 2021.

Allianz X is one of the group’s largest external investors, holding more than 5 per cent of N26, public filings at Germany’s commercial register show. The firm built its position in 2018 when it invested alongside China’s Tencent Holdings, taking part in a Series C funding round that raised about $160 million at a valuation of less than $1 billion.

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N26 told the Financial Times it was “not currently aware of any ongoing secondary sales from existing investors, including from Allianz X”, adding that it did not comment “on any internal policies our shareholders may have when valuing companies within their portfolio”.

Allianz declined to comment. A year ago, Allianz X chief executive Nazim Cetin voiced concern about N26, telling German newspaper Handelsblatt that the “growing pains are not great”.

FT calculations based on public filings suggest Allianz could realise almost $160 million for its stake, meaning it would still more than triple its investment over five years.

The lower valuation could make it harder for N26 to win additional funds at a price close to what it achieved in October 2021, when it raised $900 million from investors including Third Point and Coatue.

The 2021 investment was framed as a “pre-IPO round”. However, after tech valuation plunged around the world when interest rates started to rise, N26 pushed back its ambition to list on the stock market.

N26 is the latest fintech to suffer as investors grapple with rising interest rates, high inflation and increasing economic uncertainty. Swedish payments provider Klarna last July raised €800 million at a valuation of €6.7 billion, a drop of more than 80 per cent compared with its previous funding round. Late last year, Checkout.com’s internal valuation was put at only about $11 billion, compared with the $40 billion it secured during a fundraising in January.

In October 2022, when N26 reported a 14 per cent increase in net losses for 2021, the Berlin-based bank said it would not need new funding in the foreseeable future.

The bank told the FT that its plan to not raise funds before breaking even was on track. N26 was “well financed, independent of external capital and ... able to reach profitability without additional funding,” the lender said, adding that it had been profitable for several years on a per-customer basis.

N26 is still busy trying to get rid of an unprecedented cap on client growth that Germany’s banking watchdog BaFin imposed in late 2021 over flaws in anti-money laundering controls and its internal organisation. For more than a year, the bank has been allowed to accept only 50,000 new customers a month compared with its previous expansion of 170,000 a month.

In the sales pitch for the Allianz stake, its adviser says that most observers “agree this will soon be resolved,” stating that the “consensus seems to [be] by Q3 this year” and arguing that “the growth will pick up strongly” once the ban is lifted.

BaFin declined to comment. – Copyright The Financial Times Limited 2023