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New Fintech IPO on the Horizon with GreenSky

The latest fintech IPO is likely to be GreenSky which focuses on point of sale finance.

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One of the quiet achievers in fintech is a company called GreenSky. They have flown under the radar for years despite their astounding success. Every time the Lend Academy team has seen them mentioned in the press we take great interest since little is known about the company. It wasn’t until this cover story in Forbes last year that we learned much at all.

This could be about to change. The Wall Street Journal reported this afternoon that GreenSky has confidentially filed with the SEC for an IPO. From the article:

The Atlanta company, which operates a lending platform that enables retailers, health-care providers and home contractors to offer loans to their customers, could seek to raise $1 billion at a valuation of roughly $5 billion, some of the people said.

If GreenSky manages to raise $1 billion in a debut, it would be in rare company. Since 2015, just six U.S.-listed technology companies have raised that much or more, according to data provider Dealogic.

So who is GreenSky exactly and what do they do? We wrote about the company earlier this year when we learned of their $200 million funding round from PIMCO which made them the most valuable company in the online lending space. The company has a unique model where they partner with merchants and contractors to offer financing at the point of sale. They view themselves as more of a tech company since they do not actually lend any money. This capital light business model has likely led to much of the success they have seen. Instead of lending their own money GreenSky has relationships with about 15 banks. On the tech side, the process is paperless and all done through a mobile device.

According to details from the WSJ, the IPO could happen as soon as this summer for the Atlanta based company. However, people noted that the IPO plans are still in their early stages and the company may still do another private share sale.

Conclusion

It has been quite some time since we’ve seen a US fintech IPO, but GreenSky could change all of that. There are many companies out there that have publicly indicated a willingness to do an IPO when conditions become favorable. Maybe the GreenSky IPO could provide a trigger and we could see more companies follow. Other fintech IPOs across the globe that may come to fruition this year include FundingCircle and Lufax who have discussed going public in London and Hong Kong respectively.

Funding Circle and Lufax: Two High Profile IPOs for 2018

The two global fintech leaders will likely IPO in London and Hong Kong respectively some time this year.

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The year is barely two weeks old and we have already learned of IPO plans for two of the world’s leading fintech companies. Funding Circle has become a leading global brand in small business lending with operations in the UK, US, The Netherlands and Germany. Lufax is the Chinese fintech giant that began life as a peer to peer lender back in 2012 but has since expanded to become a leader in online wealth management.

Lufax is Preparing for an April IPO in Hong Kong

Neither IPO is a surprise as both companies have indicated their intentions before. But we now have a clearer indication on the timing. First off the rank will likely be Lufax. The South China Morning Post reported that Lufax is planning to do their IPO in Hong Kong in April at a possible valuation of US$60 billion. This would be more than three times the valuation of their previous funding round in 2016.

I interviewed the CEO of Lufax on the Lend Academy Podcast a few months ago and he said they were ready to go with the IPO but they were waiting for the timing to be right. With more clarity on the regulatory front and no significant negative news coming out of China recently the timing certainly looks to be good. Of course, Lufax has not commented officially on the story but reportedly they have hired bankers including Citic Securities, Citi, JP Morgan, Morgan Stanley and Goldman Sachs.

A Funding Circle IPO in the Fall?

[Read more…]

Marketplace Lending Predictions for 2018

A review of our 2017 predictions and some new thoughts for 2018

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Happy New Year everyone. As I do every year at this time I make a few predictions for the year ahead as well as review my previous years predictions.

Review of my 2017 Predictions

First, let’s review my predictions I made exactly one year ago. We had an interesting year as an industry in 2017, it was certainly a better year than 2016. I think I did ok on my predictions from last year although as you can read below I did get some things completely wrong.

  1. 2017 will be the year of the bank partnership
    I would say I was partially right on this one. We certainly saw a large number of new bank/fintech partnerships with deals closed from Avant, Fundation, Upstart, P2Bi, LendUp, Biz2Credit and many others. And in Europe the floodgates opened with dozens of new deals between lending platforms and banks announced. But in the US I was expecting even more partnership deals than we had so I think it is bit of a stretch to call 2017 the year of the bank partnership here.
  2. The OCC Fintech Charter will receive a positive reception
    It was an interesting year for the OCC Fintech Charter. With Thomas Curry leaving as head of the agency in April, then Keith Noreika holding the acting role for a few months and finally Joseph Otting being sworn in to lead the agency in late November it was difficult for any new initiative to get momentum. There was also the case of the Conference of State Board Supervisors suing the OCC over the charter, which was dismissed in December. So, while many of the fintech platforms supported the charter there was no real positive movement this year.
  3. Lending platforms will offer banking products
    While we had a couple of platforms offering credit cards for the most part this prediction failed to materialize. With the possible exception of SoFi I think we are still some time away from lending platforms offering a variety of banking products.
  4. One large platform will be acquired
    I am going to say I got this one right as one major platform was acquired in 2017. Student lender Earnest was acquired by Navient in a deal announced in early October. My guess that Prosper might be the platform to be acquired was wrong but there were rumors flying around about acquisition talks at more than one major platform last year.
  5. There will be no new IPOs this year
    I was almost right on this one but one US lending platform did have an IPO in 2017. Short term lender Elevate went public in April after postponing their IPO in 2016. None of the major marketplace lenders braved the public markets in 2017 as valuations continue to be depressed at many of the leading companies.
  6. China will become an important source of capital outside the USA
    I got this one right. China continues to make its presence felt as more US companies are looking for capital from that part of the world. The leading Chinese fund, the CreditEase Fintech Fund, made investments in 2017 in Upgrade, dv01, Orchard, Lenda and Nav just to name a few. China is now becoming a consideration for many more companies looking to raise money.
  7. Artificial intelligence will take center stage
    I think I read more articles about AI this year than in the previous five years combined. Whether it is for underwriting, customer acquisition, collections, compliance or cybersecurity AI is now central to the success of many lending platforms. It has taken center stage and will remain important for the foreseeable future.

[Read more…]

Credible Raises US$50 Million in an IPO in Australia

The San Francisco based online marketplace for consumer loans has gone public down under in the biggest tech IPO of the year on the Australian Exchange

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Stephen Dash likes to go down the road less traveled. As an Australian investment banker turned entrepreneur he saw a market opportunity in the USA and he jumped on it despite never having lived or worked in this country. He founded Credible in 2012 as an online marketplace for student loans. You can read a more complete version of this founding story in my podcast with Stephen from about a year ago.

He has built Credible into one of the leading online marketplaces for consumer finance in the USA. Before this IPO, which raised US$50 million, they had raised $23 million in two funding rounds from the likes of some leading Australian and Hong Kong based investors. Ron Suber, the mayor or godfather of fintech, is Chairman of Credible and joined Stephen on their recent investment road show through South-East Asia.

Now, the Credible story is going full circle. Today, on the Australian Securities Exchange (ASX) Credible is going public, raising US$50 million at a US$240M valuation in what will be the largest tech IPO in Australia this year. I caught up with Stephen Dash earlier this week to talk about this exciting development for Credible.

Australia is Looking to Attract Growth-Stage Tech Companies

The first question I asked him was why? Why go public now and why do it in Australia? He said for both questions there were many good reasons. He had decided to do another funding round and started exploring the private markets as the logical option. The reality is that when raising money privately the investment often comes with a lot of restrictions. And once you are a public company you can raise new capital quite quickly sometimes even within a week.

[Read more…]

ZhongAn Insurance Starts Trading on the Hong Kong Stock Exchange

Our China correspondent reports that the world’s largest online insurance company has raised US$1.5 billion in a successful IPO.

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The leading Chinese online insurance company, ZhongAn Online Property & Casualty Insurance Co, started trading on the Hong Kong stock exchange earlier today. Its shares jumped to as high as HK$70.50 in early morning trading, compared with the HK$59.70 IPO price, before closing at HK$65.20, still an impressive 9.2% increase. The company raised US$1.5 billion in its Hong Kong IPO making it the largest IPO since April on that exchange.

ZhongAn’s IPO will likely make the company the 4th most valuable fintech company in the world with a market cap of about US$10.4 billion, following the top three fintechs, which are Paypal ($78bn), Ant Financial ($68bn) and Lufax ($18bn).

As the financial research firm Infocast estimated based on information from local brokers, applications for ZhongAn’s share offering last week attracted demand of nearly 400 times the number of shares on offer, which means ZhongAn might be the most popular IPO in the Hong Kong stock market for the past two years.

Peter Renton interviewed the CEO of ZhongAn Insurance, Jeffrey Chen, on the Lend Academy Podcast over the summer. Jeffrey said in the interview that ZhongAn has 492 million insurance customers as of December 31, 2016. That is more than four times that of insurance giant AXA’s customer base (107 million, as of December 31, 2016). By this measure, ZhongAn truly is the world’s largest insurance company. And this is just a four-year old company! [Read more…]

Former Unicorn China Rapid Finance Goes Public at a $350M Valuation

China Rapid Finance goes public at a $350m valuation 2 years after being valued at $1 billion, even after executing well.

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Two weeks ago I wrote about China Rapid Finance and their plans to go public. I shared information about their target borrowers which they call the Emerging Middle Class Mobile Active (EMMA for short) and also dug into some interesting data points from their filing with the SEC. On April 28th, 2017 China Rapid Finance officially went public, becoming the second Chinese online lender to do so in the United States. The first company was Yirendai back in December 2015.

The IPO price was set at $6.00 and the company raised $60 million which was adjusted down from their anticipated raise of $105 million. Back in 2015, it was reported that the company had a pre-money valuation of $1 billion after closing a $35 million Series C. The company is now valued at $350 million.

It trades under ticker XRF on the NYSE. At time of writing shares were trading around $7.10 per share. Below is the stock chart from Google Finance over the last three days.

Click for larger view.

The fact that China Rapid Finance and Yirendai before them chose to go public in the US is significant. In a recent Lend Academy podcast with Yirendai CEO Yihan Fang, she stated that they felt the US was more educated on marketplace lending. This coupled with the fact that Ning Tang (Founder of parent company CreditEase) and other management members had experience in the US and were more comfortable with the US capital markets led to their decision to list in the US.

Yirendai has done well since their IPO while the US listed companies Lending Club and OnDeck have continued to struggle into 2017. Now that a second Chinese lender has gone public in the US it solidifies the importance of the US to China. Here at Lend Academy we think the opposite is also true. China and the US are the two largest economies in the world and we think it is inevitable and appropriate that these two countries should have ever closer ties when it comes to fintech.

What’s going to be interesting going forward is whether China Rapid Finance’s IPO will open up the floodgates for other fintechs to list in the US even though many firms may need to do a down round in terms if valuation due to the private-public markets valuation divide. We’ve known for quite some time that Lufax has been eyeing an IPO in Hong Kong which was postponed from last year. They would be the first peer to peer lender to list there. Many other firms though may now look to IPO in the US such as Dianrong. Their CEO Soul Htite said last year to the South China Morning Post:

In New York you get a very good valuation, but the story of Dianrong is China, so it might be better to list in Hong Kong.

Another company that could seek a US IPO is Ppdai.com who last year said it could go public in the first half of 2017.

Conclusion

Not surprisingly there has been little news as of late on any US marketplace lenders who intend to go public, but there is clearly interest in Chinese firms. After a calm 2016 it’s great to see things pick back up and it’s going to be interesting to see what the remainder of 2017 has to bring.

China Rapid Finance will be the Fifth Online Lender to IPO in the US

China Rapid Finance will be the second Chinese online lender that has opted to list in the US.

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In late March, 2017 we learned that Chinese online lender China Rapid Finance filed to go public, hoping to raise up to $100 million. They will list on the New York Stock Exchange under the ticker symbol XRF and will be the second Chinese online lender to go public in the United States. Yirendai (YRD) was the first to go public in December 2015.

While there is great detail about their business and financials in their filing we’ll share a little bit here in case you’re not familiar with China Rapid Finance. The borrowers they focus on are what they call Emerging Middle Class Mobile Active (EMMA). This demographic totals 500 million Chinese citizens who lack any credit history but have an employment record. Because these borrowers lack credit data, they are not well served by the banks in China. According to the filing:

The growth of EMMAs’ lifetime customer value on our marketplace is just beginning. Our strategy is to serve EMMAs’ lifetime credit needs. We seek to facilitate more loans that are larger and have longer terms to higher quality borrowers and gradually lower borrowing costs to borrowers who have demonstrated favorable repayment behavior on our platform. We believe rewarding favorable repayment behavior will help us retain borrowers and that we will be able to generate increasing fee revenue from increased loan volumes from these higher quality borrowers.

Nearly 90% of all volume on the platform is to prime and near-prime borrowers. The company compares their borrowers roughly to FICO scores of between 660 and 720.

As you can imagine the lack of credit data leads to many challenges. The company is heavily weighted towards data scientists and has offices both in Shanghai and San Francisco. Using thousands of data points from alternative data sources which include information on work history, payments, e-commerce, telco, search, and social data the company is able to underwrite and price risk. The company has partnered with both Tencent and Baidu. Investors include affluent, high net worth and family offices who have seen historic returns in the low double digits.

The most interesting thing about China Rapid Finance is that they have underwritten more loans than many online lenders due to the small loan sizes and repeat borrowers. The loan sizes can be under $100 which means the company needs to be extremely efficient when deciding whether to provide a loan. China Rapid Finance has facilitated 10.7 million loans on the platform to 1.4 million borrowers.

Similar to many other platforms, China Rapid Finance is a pure marketplace, booking service and transaction fees from both borrowers and investors and does not hold loans on their balance sheet.

Conclusion

We have said many times before on Lend Academy that the Chinese online lending market is fascinating. Companies like China Rapid Finance have proved out a model, making small loans to a large population in an area where the banks either can’t or choose not to play. It’s an exciting time in China as more companies are approaching the public markets having thus far chosen to list in the US. As companies like China Rapid Finance file to go public we are getting a detailed look at their businesses. Their F-1 filing can be found here.

Marketplace Lending Predictions for 2017

My annual gaze into the crystal ball brings you seven predictions for 2017 as well as a review of my last year's predictions.

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Crystal ball - 2016 predictions

Happy New Year everyone. As I do every year at this time I make a few predictions for the year ahead as well as review my previous years predictions.

Review of my 2016 Predictions

As we know 2016 turned out in a way that was completely unexpected. Regardless, I will go through what I thought would happen in 2016 – some things I got right and with others I was way off.

  1. Lending Club will launch an auto lending operation this year
    Despite the challenges at Lending Club in 2016 I did get this one right. They launched a new auto lending operation in October in their first new product expansion in more than two years.
  2. Consolidation will begin
    I was not really right with this one. While consolidation did begin somewhat in 2016 my suggestion of three platforms buying acquired by larger competitors did not really come true. We saw several platforms go out of business but only one or two minor acquisitions.
  3. There will be five IPOs in our industry in 2016
    I was embarrassingly wrong on this one. I expected the IPO market to rebound in 2016 and several of the large platforms to take advantage of the public markets. I was completely wrong with zero IPOs in our industry in 2016.
  4. Three large banks will build platforms
    I was pretty much right on this one. We had Goldman Sachs launch their Marcus platform in 2016 and we also saw Wells Fargo launch their Fastflex product for online small business lending. While outside the US, German banking giant Commerzbank launched their own online lending platform.
  5. A Chinese company will buy a U.S. marketplace lending platform
    This did not happen in 2016 although interest in the US marketplace lending industry in China has never been stronger. I think I was probably a couple of years early on this prediction.
  6. The retail investor will become more in favor in 2016
    The retail investor certainly became more in favor this past year. There were some new Reg A+ deals announced and Lending Club made several moves aimed at increasing retail investor volume including the one just last month providing bonuses for new IRA investment.
  7. A new trade association will finally launch
    This was an easy one to predict as many of the leading companies have been talking about it for some time. The Marketplace Lending Association launched in April and we had several other initiatives launch as well.

[Read more…]

Marketplace Lending Predictions for 2016

I stare into my crystal ball and provide predictions for the year ahead as well as review my predictions from one year ago.

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Crystal ball - 2016 predictions

Happy New Year everyone. Here is my annual predictions post where I review my previous years predictions and make some new ones for the new year.

Review of my 2015 Predictions

  1. Lending Club will issue $10 billion in new loans and Prosper $4.1 billion
    I was a bit optimistic on my loan volume predictions. While both companies had a great 2015 Prosper came in at $3.7 billion for the year, below my $4.1 billion projection. We won’t know Lending Club‘s final numbers until their next earnings call in a few weeks but we do know that they did $5.8 billion through Q3. So, if they keep a similar growth rate to previous quarters I would expect around $2.5 billion in Q4 for $8.3 billion in total loans for the year. Still a great year but below the aggressive numbers I projected.
  2. Prosper will remain a private company
    I got this one right. Prosper remained a private company with not even a whisper of an IPO for them in 2015.
  3. There will be two new marketplace lenders completing an IPO
    This one I got completely wrong. Given the state of the IPO market today compared with 12 months ago it is not surprising that no other U.S. based marketplace lending went public in 2015.
  4. A new platform will launch targeting non-accredited investors
    I was only partially right on this one. While several new platforms contacted me throughout the year with their intention to launch for retail investors the only offerings that actually launched in 2015 were from existing real estate platforms Groundfloor and Fundrise.
  5. A midsize bank starts their own marketplace lending platform
    This was an interesting one. While I also did not get this one right there was more talk about the banks role and response to our industry in 2015 than ever before. We did see news break in June about the intention of Goldman Sachs to create their own platform but nothing has materialized on that front yet. I think I was just a year early on this (see prediction #4 below).

I also predicted that Lending Club would make two acquisitions and I was dead wrong on that as well. Lending Club is biding their time on acquisitions but clearly they will grow their borrower base at some point through acquisitions. I am confident that the predictions I got wrong will all come true in the near future, some in 2016 as you can see below.

My 2016 P2P Lending Predictions

Now on to this year. I am going to see if I can improve on my somewhat dismal performance from 2015. Here are several predictions I feel confident making for 2016. [Read more…]

CreditEase’s Online Platform Yirendai Becomes the Third Major P2P Lender to IPO and China’s First

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Yirendai IPO

Yirendai_IPO_Jason_PeterLast Friday Peter and I had the honor of joining the CreditEase team on the NYSE floor to ring the opening bell and celebrate the successful initial public offering of Yirendai, their online platform. It was an exciting moment for the company and our industry since it marks the first major IPO of a Chinese P2P company.

Yirendai successfully raised $86 million by selling 8.6m shares at $10 per share and it closed the day at $9.10 for a market cap of $544 million (they have 58.5 million fully diluted shares outstanding). The stock trades under the symbol YRD and the IPO was led by Morgan Stanley and Credit Suisse.

Yirendai Spins out of CreditEase, the Largest P2P Firm in the World

CreditEase is an enormous P2P company based in China. It was one of the first P2P companies in the world when it launched in 2006 and has evolved into a full service financial services firm that provides inclusive finance and wealth management products and services in China. We love analyzing CreditEase because they represent the future of P2P lending. Their focus on “inclusive finance” means that they offer products to borrowers across the credit spectrum ranging from prime quality borrowers, to near prime borrowers, to sub-prime borrowers.

Their first loan was a student loan and over time they have expanded to almost every major (P2P) lending category including student loans, auto loans, rural loans, mortgages, small business loans, and consumer loans for home improvement, weddings, vacations, and other life events. In addition, early on they realized that P2P lending was only their first product and they have since expanded to wealth management products, which include equities, real estate, credit, alternative investments, and insurance. They have a huge network of over 230 physical locations, they have grown to over 44,000 employees, and they have originated over $25 billion in loans. They are like Lending Club, Avant, LendUp, SoFi, LendingHome, and Charles Schwab wrapped into one company. [Read more…]

About Lend Academy

Lend Academy has been bringing you all the news and information about peer to peer lending since 2010. Founded by Peter Renton, Lend Academy not only has the most active news site, but also the largest online forum and the first and most popular podcast in the industry.

The Lend Academy team loves peer to peer lending and our staff have all invested their own personal money in one or more of the platforms. Lend Academy Media is part of Cardinal Rose Group which also owns LendIt, the leading industry conference, and has a majority interest in NSR Invest.

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