The race to IPO by P2P’s big Three

  • The game’s afoot. P2P’s ‘big three’ – Zopa, Funding Circle and, most recently, RateSetter – are all rumoured to be finalising plans to secure a listing on the London Stock Exchange, although each remains coy about specific intentions, exact sums of money involved and precise timings.

    Leading the race is Funding Circle which could come to market as early as “late autumn” this year, sporting a valuation of anything from £1bn to £2bn; an £82m fundraising round in January 2017 put a notional value on the company of £0.9bn. A lot has happened since then and, most recently, the company has reportedly drafted in some of the biggest names in investment banking and broking – Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley and Numis – to help with the exercise, which certainly suggests that they're not taking any chances with the float.

    Zopa already has a powerful backer in India’s Wadhawan Global Capital which put up some of the £32m raised only last June; the company is now said to be looking for a further fund raise of £50m, much of the money to be used to finance regulatory requirements for the launch of the company’s own digital bank. If the unofficial predictions are right, this would put a valuation of around £400m on the company.

    RateSetter – which is reported to have retained the services of Lazard (a former employer of Rhydian Lewis, RateSetter’s CEO) and broker Peel Hunt – is thought to be looking to raise £30m, which some commentators calculate will put a price tag of around £280m on the company. If true, this will certainly act as vindication for two of RateSetter’s most loyal backers, Woodford Investment Management and Artemis. Such a move would also serve to allow the company (in the words of Rhydian Lewis) to “solidify its position as an investor brand.”

    Although they have different business models, all three have one thing in common – they have all been lossmakers in their pursuit of scale, which could make it tricky to calculate a precise value for the businesses. RateSetter, which passed the £2.5bn in total lending mark in May, is looking to return to profit this financial year having made a loss of £4.9m last year. Funding Circle had made accumulated losses of a whopping £116.6m up until September 2017. Meanwhile, Zopa’s last reported accounts (for 2016) showed that revenues had rocketed by 60% and that losses had narrowed from £8.8m in 2015 to £5.8m, but subsequently the company has confirmed that it traded profitably in Q4 2016 and presumably this trend has continued.

    In any event, all the latest numbers will have to be revealed if and when the companies eventually seek their respective listings. The rest will be down to timing and whether the appetite is there to make the founders’ and original investors’ dreams come true. Let us hope for their sakes that the decision taken in June to wind down Ranger Direct Lending, the closed-end fund that specialises in alternative finance investments, doesn’t extend any nervousness in the loans as an asset class to the platforms themselves.

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