It was bound to happen sooner or later. According to the Financial Times, the UK will have its first P2P platform listed on the London Stock Exchange within the next twelve months.
The proposed move by LendInvest – a specialist in ‘buy to let’ mortgages – follows in the wake of two IPOs in the United States towards the end of last year: OnDeck and Lending Club, the latter achieving instant glory by rocketing 60 per cent on its first day of dealings to hit a jaw-dropping market valuation of $9 billion.
The fact that Lending Club’s shares have since slipped back to below the offer price has in no way dispelled the excitement of what potential riches could lay ahead for the Altfin players on this side of the Atlantic. Of course, a lot could happen between now and LendInvest’s eventual float, but it does at least serve to reaffirm the vision of our own homespun entrepreneurs and hold out the prospect of healthy returns on their risk and investment.
The good news from the sector’s point of view is that one if its number is preparing to offer itself up to the close financial scrutiny that goes with securing a Stock Exchange listing. As a test case, there will be no hiding place when it comes to the due diligence process. The reputations of the attendant professional advisers and sponsors will most definitely be on the line alongside those of the management team. As the initial benchmark against which others will be judged, it will be doubly important for everyone, rivals included, that this exercise goes smoothly and successfully because it will establish the market’s appetite. If it goes badly, the fall-out could be expensive in more ways than one.
That LendInvest is profitable helps a lot. The company, which claims to be the world’s largest mortgage crowdfunding marketplace, made annual profits of around £2.5m last year. This helps because many of the UK’s other P2P platforms are still on their journey towards first profits – again, further proof that there are good profits to be made from trading once the business model is established and a critical mass of volume can be achieved.
Profits will not be the only factor, of course. Strategy is bound to play a significant part, especially for the niche platforms. We will doubtless see consolidators emerge seeking to increase revenue streams and reduce costs by merging platforms. Those unable to exit via a Stock Exchange float could well find other trade buyers who are more concerned with gaining medium to long term strategic advantage than short term profits. And then there are our old friends, the banks, which have already started to form strategic alliances to gain political as well as commercial advantage under a flag of truce.
Sector evolution is happening before our very eyes.