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Investors buy into XP Investimentos’ growth story

Itaú retains 49% stake, now equivalent to 10% of the group’s market cap, as rapid growth leads to runaway valuation.


The outlook for new equity issuance from Brazilian financial institutions in 2020 has been brightened by the strong performance of XP Investimentos’ IPO in December 2019.

The Brazilian financial services group sold nearly $2 billion in shares on Nasdaq to become the fourth-largest US IPO offering in 2019. The transaction priced at $27, above the initial price range of $22 to $25, and then kept going: the stock popped by 28% in the first day of trading, which took the valuation of the company to more than $19 billion – more than Banco BTG Pactual (at $15.7 billion)

The listings valuation – of $14.9 billion – was already equivalent to 60 times 2019 earnings. The huge multiples (Charles Schwab, the investment company that XP’s CEO Guilherme Benchimol was consciously copying, has an average price/earnings ratio of around 18x) reflects a bet that XP can continue its recent growth. 

The company reported a compound annual growth rate of assets under custody of 92% between 2014 and 2018. Total assets under custody are R$350 billion and the company now has more than 1.5 million customers. The company had generated R$3.7 billion ($0.91

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