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Blend’s $360 Million IPO Shows That Fintechs Are Ready to Challenge The Financial Status Quo

Why Blend's IPO signifies a new era for fintech

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[Editor’s note: This is a guest post from Dmytro Spilka. He is a tech and finance writer based in London. Founder of Solvid and Pridicto. His work has been published in The Diplomat, Investing.com, IBM, Investment Week, FXStreet, Entrepreneur and FXEmpire.]

Mortgage software company Blend Labs launched its IPO last week, generating $360 million and a valuation of more than $4 billion. Although these numbers seem impressive for a fintech startup still less than 10 years old, Blend’s ambitions show that the fintech ecosystem is ramping up its battle to overtake traditional financial institutions. 

Blend made 20 million shares available at a price of $18 each and is listed on the New York Stock Exchange under the symbol BLND. 

As a fintech that specializes in utilizing big data and automation to leverage end-to-end customer journeys for mortgages and other banking products, Blend has achieved widespread recognition in the world of real estate. The company was named as one of HousingWire’s 2021 Tech 100 winners, and has grown since its 2012 formation to become an industry leader in mortgage tech. 

Blend’s white label technology is what powers mortgage applications through the websites of leading banks like Wells Fargo and US Bank – its offering was also integrated with CoreLogic in 2019 for an easier level of access to borrowers’ credit. 

(Image: Insider)

As Q3 2020 data published by Insider shows, global fintech merger and acquisition activity has accelerated rapidly over the past decade to $233.8 billion in 2019 – a full $100 billion clear of the next best year prior. 2020 was also shaping up to be a wildly successful year at the time the data was collected despite Covid-19 uncertainty dominating Q1 and Q2 of the year.  [Read more…]

Upstart Completes Their IPO, Soars 47% on Trading Debut

The latest fintech IPO is consumer lender Upstart who enjoyed a successful first day as they began life as a public company

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Leading fintech lender Upstart went public on Nasdaq today (ticker: UPST) in a successful IPO that saw the company raise $240 million as it sold 12 million shares. They priced the IPO late yesterday at $20, the low end of their $20-$22 range but shares finished today at $29.47, a solid 47% gain.

We first wrote about Upstart back in 2014 soon after the company pivoted from income share agreements to focus on personal loans. They have been a marketplace lender offering unsecured consumer loans but in the last couple of years they have also moved into the banking as a service market, offering their AI-enabled lending models to banks.

They are powering the personal loan programs of several banks including First National Bank of Omaha, TCF Bank and First Federal Bank of Kansas City to name a few. Last year at LendIt Fintech USA Upstart CEO Dave Girouard spoke with Marc Butterfield of FNBO and Robert Perrelli of TCF Bank (audio here) where they went into some detail about this bank partnership model.

Upstart describes themselves as a cloud-based artificial intelligence lending platform. They have been talking about artificial intelligence-enabled lending since they launched the company and for a while they were really the only one talking about it. They have always maintained that using AI helps expand the credit box and automate the lending process while also reducing the credit risk for investors. They have an eight year track record now where their AI models have continued to be improved.

Digging in to Upstart’s S-1 filing it is interesting to note how much bank partnerships have become a key part of their business. While 22% of loans originated in Q3 2020 were retained by one of the originating bank partners they certainly wanted to stress that side of their business. The term “bank partner” appears 370 times in the S-1.

Upstart has seen impressive growth this year despite the pandemic. The number of loans originated in the nine months ended September 30, 2020 was 176,983 up 30% from 2019. Revenue for the period was up 44% to $147 million and they even turned a $5 million profit. Of course, it wasn’t all smooth sailing this year. Upstart saw an 86% reduction in the number of loans originated in Q2 but by Q3 they had recovered and saw strong originations again.

History has not been kind to fintech lenders on the public markets. Consumer lenders LendingClub, GreenSky and Elevate are all trading for a fraction of their IPO price today. Upstart no doubt believes their story will be different, citing both their bank partnership strategy and their differentiated AI-enabled underwriting model.

They are off to a great start in the public markets. But many other fintech lenders had successful first days as well. It is going to be fascinating to see if they can write a different story over the long term.

A Look Back at the Five Years Since the LendingClub IPO

A lot has changed since LendingClub became a public company back in December 2014

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It is hard to believe that it was five years ago today that LendingClub went public. December 11, 2014 marked an important moment in fintech history as LendingClub became the first online lending platform to complete a successful IPO. At the following LendIt event held a few months later in NYC there was an incredible enthusiasm for the industry as we all imagined the continued upward trajectory of the industry.

Peter Renton (left) with LendingClub CEO (then COO) Scott Sanborn at their IPO at the NYSE

A lot has changed over the years and many are quick to point out LendingClub’s poor performance in the public markets and the LendingClub debacle which was widely reported on back in May 2016. Publicly listed fintech lenders have struggled overall while companies in the payments space such as Paypal and Square have fared much better. Peers who have remained private have had much more success when it comes to valuations which is likely why we haven’t seen many new fintech lending IPOs in recent years. Those who have gone public have tended to perform poorly at least from a stock price perspective. However, there is much more to the LendingClub story. For starters they are the largest personal loan provider in the US having issued over $53 billion in loans, a stat I believe is often overlooked. [Read more…]

Credible Sells Majority Stake to Fox Corporation for $265 Million

Lending marketplace, Credible Labs, has reached a deal to sell 67% of the company to media giant Fox Corporation

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There is some big news out of Australia today. Credible Labs, based in San Francisco but listed on the Australian Stock Exchange, has reached an agreement with Fox Corporation (yes, that Fox) to sell 67% of the company for $265 million. This values the company at $397 million which is a 31% premium over the stock’s closing price on May 28, the day before receiving the offer from Fox. Fox Corp. will also provide $75 million in growth capital over the next two years.

Founder and CEO Stephen Dash (you can listen to my 2016 interview with him here) is an Australian who moved to San Francisco in 2012 to start Credible. He will remain head of the newly formed Fox subsidiary and will exchange shares equal to 33% of Credible’s outstanding common stock into units of this subsidiary.

I sent Dash a message last night but he did not respond by the time of publication. However, he did say this in the press release:

Fox Corporation’s record of innovation and focus on audience engagement will further enhance Credible’s position as a leading consumer finance marketplace in the United States, creating opportunities for organic growth and the expansion of the Credible platform. Credible’s industry-leading user experience, combined with FOX, will provide greater impact and scale for consumers.

New York-based Fox Corporation is actually a newly created media company controlled by the Murdoch family. It was formed out of the Disney acquisition of 21st Century Fox and it began trading on Nasdaq earlier this year. It includes Fox’s television properties such as Fox News, Fox Business Network and Fox Sports.

Here is what Fox CEO Lachlan Murdoch said about the acquisition: [Read more…]

Funding Circle Goes Public on the London Stock Exchange

Funding Circle is the first UK marketplace lender to IPO, raising £300 million at a £1.5 billion valuation

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It was a landmark day for fintech in London as Funding Circle became the first UK marketplace lender to complete an IPO.  The company raised £300 million at a valuation of around £1.5 billion. They began trading on the London Stock Exchange (LSE: FCH) this morning with an initial price of 440 pence (at the lower end of the forecasted price range of 420p to 530p). While rising early in the day to 460p it closed the exactly flat at 440p.

While you couldn’t call that a blockbuster first day it wasn’t too bad and we have learned from the experience of LendingClub and OnDeck in the US that a great first day really means nothing as to the long term prospects for the share price.

Funding Circle has become a force in small business lending in the UK. In 2017 they were the largest net lender to small businesses in the UK surpassing even the largest banks. They also have substantial lending operations in the US, Germany and the Netherlands with total lending to date over $7 billion globally. They have made it clear that they intend to continue to expand their geographic footprint as time goes on. There is no other lender in all of marketplace lending that has such a large international business outside their home country.

Here is what CEO Samir Desai said in an official statement today: [Read more…]

Funding Circle to IPO in London This Month

Funding Circle has filed registration papers with the London Stock Exchange to go public

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Funding Circle CEO Samir Desai speaking at LendIt Europe

The most anticipated fintech IPO in the UK is finally going to happen. Yesterday, small business lender Funding Circle filed papers with the London Stock Exchange to go public in a deal expected to raise £300 million and value the peer to peer lender at more than £1.5 billion.

This is big news for the fintech community not just in the Europe but for the US as well. Funding Circle has had a US operation since 2013 and has loaned more than $1 billion here. Overall, Funding Circle has said it has loaned more than £5 billion (around $6.5 billion) in the four countries where it operates: UK, US, Germany and The Netherlands. Clearly, the US is the largest of these markets and it is highly likely that the US will eventually be Funding Circle’s largest market.

According to this piece in Forbes, Funding Circle is now the biggest small business lender by volume in the UK. And while they are expanding the overall market there in conversations I have had with CEO Samir Desai over the years he has made it clear that he intends to make Funding Circle a global brand. So, their international business will become ever more important as time goes on.

Funding Circle is expanding their footprint in the US. Last month I attended the official opening for their new office in Denver, Colorado (I am based in Denver). Their US headquarters are in San Francisco so Denver will be their second US office. The modern office space in downtown Denver has room for about 200 people although at the time of their launch they had around 40 people on staff there. So, clearly they have big expansion plans for the US. [Read more…]

GreenSky Completes Largest Fintech IPO of the Year

GreenSky, the point of sale lender went public today, raising $874 million

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There has been a lull in US based fintech IPOs over the past several years. Both LendingClub and OnDeck went public in late 2014. At the time I thought it would open the floodgates for other more established fintech players, a story which did not come to fruition. Since then we have mostly seen IPOs from Chinese based fintechs such as Yirendai and China Rapid Finance.

This morning, GreenSky broke the streak, listing on the Nasdaq under ticker GSKY.

There is a lot that sets GreenSky apart from many of the fintech companies that exist today. The biggest differentiator is that the company is profitable and runs a high margin business. In fact, the company has been profitable for the last five years. They reported $139 million in net income on revenues of $326 million last year. They also have a highly differentiated, boots on the ground model to originating loans, empowering contractors to offer financing to homeowners at the point of sale. They also partner with other types of merchants to offer financing. GreenSky only holds a small portion of loans on their own balance sheet with most loans being funded through around 15 bank partners.

Forbes did an excellent profile on their David Zalik back in September 2017 which shares exactly how the business operates. We learned at that time, Zalik still owned more than half of the company. GreenSky’s IPO priced at the top end of their estimated range at $23. They offered 38 million shares which means the company raised $874 million. At time of writing, GreenSky was trading around their IPO price.

Conclusion

It’s going to be interesting to both watch GreenSky as a public company and also keep an eye on what this means for other fintech companies who may want to go public. There are a few IPOs on the horizon with Lufax in China and Funding Circle in the UK, but there are no other near term plans for US fintech IPOs that we know. Last week we learned that iZettle wouldn’t be doing an IPO as PayPal swooped in and bought the company.

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…]

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LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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