Warren Buffett’s Berkshire Hathaway plowed about $250 million into Nubank’s IPO, report says. The Brazilian fintech’s ties to Sequoia Capital may help explain why.

Warren Buffett.

  • Warren Buffett’s Berkshire Hathaway invested about $250 million in Nubank’s IPO this week.
  • The investor’s company plowed $500 million into the Brazilian fintech earlier this year.
  • Nubank’s close links to Sequoia Capital may have encouraged Buffett and his team to invest.

Warren Buffett’s Berkshire Hathaway bought close to 30 million shares of Nubank during its initial public offering this week, Bloomberg reported, likely costing it about $250 million at the IPO price of $9. The famed investor’s conglomerate already piled $500 million into the Brazilian fintech in June.

Berkshire may have invested partly because of  Nubank’s ties to Sequoia Capital. The storied venture-capital firm — an early backer of Apple, Google, and Airbnb — provided seed funding to Nubank in 2013, and now commands a stake worth over $8 billion following the digital lender’s IPO. Moreover, Nubank’s cofounder and CEO, David Vélez, is a former Sequoia partner.

Buffett and his business partner, Charlie Munger, have largely avoided high-valued technology companies, lossmaking startups, overseas companies, and IPOs throughout their careers. However, Munger has repeatedly praised Sequoia’s ability to find and back future world-beaters.

“The most remarkable investment firm in America is probably Sequoia,” the 97-year-old investor said last year. “They have made more money than anybody, and they have the best investment record of anybody. It’s perfectly amazing what they have done.”

“Warren and I are better at buying mature industries than we are at backing startups,” Munger said at Daily Journal’s annual meeting this year. “I would hate to compete with Sequoia in their field. They would run rings around me.”

Sequoia’s close ties to Nubank may have spurred Buffett and his team to bet on the digital bank, despite it losing nearly $100 million in the nine months to September 30, and commanding a $50 billion market capitalization that dwarfs its $737 million in revenue last year.

On the other hand, one of Buffett’s deputies, Todd Combs, has spearheaded investments in Indian mobile-payments group Paytm, Brazilian fintech StoneCo, and US cloud-data platform Snowflake in recent years. He may have simply identified Nubank as a compelling investment, without Sequoia’s involvement being a factor.

Either way, Berkshire’s decision to invest $500 million in a private, foreign, unprofitable tech company, then to inject another $250 million during the startup’s IPO, suggests Buffett and his team are happy to follow Sequoia’s example.

https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-nubank-stock-ipo-sequoia-capital-munger-2021-12