Summary of "Chit Chat Stocks" Episode: 4 Hot IPO Stocks To Watch In 2025
Podcast Information:
- Title: Chit Chat Stocks
- Hosts: Ryan Henderson and Brett Schafer
- Episode: 4 Hot IPO Stocks To Watch In 2025 (Circle Internet Group, CoreWeave, Chime, And eToro Group)
- Release Date: July 2, 2025
Introduction to the Episode
In this episode of Chit Chat Stocks, hosts Ryan Henderson and Brett Schafer welcome Tyler from Misfit Alpha—a Substack dedicated to analyzing IPOs and obscure stocks. The trio delves into four promising IPOs slated for 2025: CoreWeave, Chime Financial, eToro Group, and Circle Internet Group. The discussion aims to provide listeners with in-depth insights into these companies, evaluating their business models, market positions, and potential risks.
CoreWeave: Powering the AI Infrastructure Revolution
Business Model & Market Position
CoreWeave, ticker symbol CRWV, operates as a data center company with a specific focus on AI infrastructure. Founded just a few years ago, CoreWeave has rapidly achieved a market capitalization of approximately $77.6 billion. Brett Schafer explains, “[B]asically, CoreWeave is an infrastructure play on AI, similar to Microsoft Azure or Amazon Web Services, but more independent in the AI space” (03:07).
Valuation & Growth
The company's revenue is astonishingly growing at 400% year-over-year, yet their capital expenditures (capex) guidance stands at around $20 billion for the fiscal year, compared to an expected revenue of $5 billion (06:21). This aggressive investment is geared towards expanding their processing capacity to meet the surging demands of the AI revolution.
Risks & Corporate Governance
A significant concern highlighted is the rapid depreciation of Nvidia GPUs, essential to CoreWeave's operations. Ryan Henderson remarks, “Is it not insanely risky to be kind of banking on... [if there's a] two-year lapse in demand, does that not crush them...” (09:58). Additionally, Brett expresses unease over CoreWeave’s corporate governance, noting their dual-class share structure which disproportionately gives founders voting power despite holding a smaller economic stake (16:58).
Key Quote:
"What makes them competitive is if you are a true believer in the AI boom, then the problem of a downturn, the problem of pricing kind of washes away with the demand." – Brett Schafer (05:25)
Chime Financial: Fintech’s Answer to Underbanked Populations
Business Model & Operations
Chime Financial, a well-known consumer-facing fintech company, operates as a credit and debit card issuer without holding an FDIC charter. Instead, it partners with banks like Bancorp to offer savings and deposit accounts (19:06). Chime targets the underbanked and unbanked demographics, providing services such as interest-free payday advances tied to direct deposits.
Revenue Streams & Risks
Chime's primary revenue comes from interchange fees generated when users utilize their debit and credit cards. However, the company also offers loan products that resemble payday loans, introducing embedded credit risks. Brett notes, “They offer interest-free loans, taking on credit risk without the benefits of interest rates or anything like that” (25:01).
Scaling and Future Prospects
Brett suggests that for long-term sustainability, Chime might need to acquire its own banking charter, similar to what SoFi has done. This move would allow Chime to better manage credit risks and reduce dependency on partner banks (30:41).
Key Quote:
"These are some of the things where like the bank relationship gets a little bit strained because... Chime is on the hook." – Brett Schafer (25:01)
eToro Group: A Global Brokerage Giant
Business Model & Market Reach
eToro Group, trading under the ticker ETOR, is an Israeli-based discount brokerage firm operating primarily outside the United States, with 87% of its client base in Europe and Asia Pacific. Founded in 2007, eToro offers zero-commission stock trades and a suite of financial products, including commodities, currencies, and cryptocurrencies (33:09).
Financial Performance & Challenges
eToro's revenue is heavily reliant on trading volumes, especially in commodities and crypto markets. The company experienced fluctuating financial performance correlating with the crypto market's volatility—from thriving during boom periods like 2021 to struggling during downturns such as the "crypto winter" of 2022-2023 (36:17).
Growth Opportunities & Competitive Landscape
With approximately 3.2 million funding accounts, eToro has significant growth potential in the European market, facing competition from established players like Robinhood entering the UK market and Interactive Brokers dominating institutional segments.
Key Quote:
"Brokerages, once you get an AUM built up, it's a pretty resilient business model that is going to generate some level of profitability in good times and bad because it's all about transaction volume." – Brett Schafer (58:01)
Circle Internet Group: The Stablecoin Pioneer
Business Model & Operations
Circle Internet Group is a key player in the stablecoin market, primarily issuing the USD Coin (USDC) and Euro Coin (EUROC). Their business centers on providing efficient, wallet-to-wallet payments using stablecoins to replace traditional banking and credit card transactions, especially for remittances (43:27).
Revenue Model & Financial Health
Circle's revenue primarily comes from interest income on the substantial cash reserves backing their stablecoins. However, maintaining a 1:1 peg with the dollar requires holding large amounts of cash in safe, short-term investments, making their profitability sensitive to interest rate fluctuations. In the most recent quarter, EBITDA margins declined from 15% to 11% due to lower money market rates (48:02).
Valuation Concerns
With Circle's market cap around $50 billion and USDC's market cap at approximately $60 billion, Brett expresses skepticism about the valuation gap. He argues that unless the stablecoin market significantly expands, the current valuation appears disconnected from the business’s revenue potential (48:37).
Key Quote:
"The total amount of stablecoins in circulation is going to be much, much higher than $60 billion... if stablecoins all of a sudden eat the world, then yeah, it makes sense." – Brett Schafer (52:30)
Comparative Analysis and Investment Perspectives
Ranking of Interest in IPOs
Both hosts and Tyler discuss their preferences regarding these IPOs, emphasizing corporate governance, business resilience, and growth potential:
- eToro Group: Considered the most resilient due to its diversified trading volume and global presence.
- CoreWeave: Acknowledged for its strong position in AI infrastructure despite governance concerns.
- Chime Financial: Viewed as promising with potential for growth but facing significant operational risks.
- Circle Internet Group: Noted for its pioneering role in stablecoins but criticized for its high valuation and sensitivity to interest rates.
Key Insights:
- Corporate Governance: A recurring concern, particularly with CoreWeave’s dual-class shares and Circle’s management structure, which may disadvantage minority shareholders (16:58).
- Business Models: Emphasis on understanding how each company generates revenue and manages risks is crucial for evaluating their long-term potential.
- Market Trends: The AI boom, fintech innovations, and stablecoin adoption are pivotal trends influencing these IPOs.
Key Quote:
"Brokerages seem to be the most in control of their own destiny relative to the other ones." – Brett Schafer (61:30)
Investing Lessons for IPOs
Brett Schafer shares essential advice for investors considering IPO stocks:
- Be Skeptical: Avoid being lured by compelling narratives; conduct thorough due diligence beyond public disclosures.
- Understand Use of Proceeds: Analyze how the company plans to utilize the funds raised from the IPO—whether for business expansion or merely to cash out existing investors.
- Long-Term Perspective: Focus on companies with sustainable business models and clear growth strategies rather than temporary market excitement.
Key Quote:
"Always keep in mind that things might not necessarily be quite as good as they're saying in a public disclosure." – Brett Schafer (62:07)
Conclusion
The episode provides a comprehensive analysis of four notable IPOs in 2025, offering listeners valuable insights into their business models, valuations, and potential risks. The hosts emphasize the importance of scrutinizing corporate governance and understanding the use of IPO proceeds to make informed investment decisions. By highlighting both opportunities and challenges, Chit Chat Stocks equips investors with the knowledge to navigate the complex landscape of new public offerings.
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