Does the hype surrounding FinTechs lead to an overvaluation of their stock prices ?

Abstract

This thesis aims to bring its contribution to the academic literature about the financial technology sector, recently referred as “FinTech”. More precisely it attempts to detect whether the recent hype surrounding FinTechs has an influence on their stock prices. Firstly, a valuation through a DCF model of FinTechs operating in the payment industry allows to highlight an overvaluation of the Payment FinTech sub-sector. Secondly, various hypothesis tests demonstrate that the overvaluation is significant. Thirdly, the regression of a stock index built from the firms’ sample on the hype surrounding the whole sector proves that a greater level of hype leads to a rise in the Payment FinTechs’ stock prices. These results are considered as evidence of a possible formation of a bubble in the FinTech sector. These findings are supported by the substantial rise in FinTechs’ investments and by the unusual attention from the public towards the sector. This phenomenon is somewhat reminiscent of the high-tech bubble that emerged during the last years of the 20th century.