The capital markets have been anything but predictable this year. As of the closing bell on June 12, the S&P 500 and Nasdaq Composite have gained just 3% and 2% on the year, respectively. The common thread stitching these mundane gains together is uncertainty.
From ongoing tariff negotiations, interpretations of economic data, and how the Federal Reserve could alter its policies, to geopolitical tensions across Europe and the Middle East, investors have been left scratching their heads trying to find a safe haven for their cash.
Nevertheless, one pocket of the stock market that has been hot this year is initial public offerings (IPOs).
Over the last couple of weeks, fintech companies Circle Internet Group (NYSE: CRCL) and Chime Financial (NASDAQ: CHYM) completed their IPOs. Despite the turbulence weighing on the stock market, both Circle and Chime have witnessed skyrocketing share prices since going public.
Let’s explore what these companies do and try to understand what is driving the positive investor sentiment. From there, I’ll give my opinion on which stock I like better for the long run.
Circle operates at the intersection of payments infrastructure and cryptocurrency. More specifically, the company is the issuer of USDC, a stablecoin that is pegged to the U.S. dollar.
While Circle very much operates in the decentralized finance (DeFi) realm, it could be argued that an investment in the company is a safer alternative to cryptocurrencies such as Bitcoin or Ethereum. The reason I say that is because Circle, while heavily dependent on crypto adoption, provides some degree of insulation from the volatility typically exhibited by crypto tokens.
Chime is what’s known as a neobank. Like SoFi Technologies, Chime positions itself as a tech-first banking-as-a-service platform.
This is a unique model in the financial services industry, which still primarily relies heavily on physical brick-and-mortar locations to offer lending and investment services that can also be marketed online.
Since its IPO earlier this month, shares of Circle have risen by 50% as of this writing. Similarly, Chime stock popped by almost 40% in its public market debut. Of note, shares of Chime have sold off a bit in the days following its IPO, which is not atypical.
