Funding Circle IPO: Squaring the circle
Funding Circle demonstrates the pitfalls of IPO-ing a marketplace lender.
The story of small business lender Funding Circle’s IPO in October was in some ways a surprise – and in other ways entirely predictable.
When the IPO was launched at the beginning of September there was feverish speculation that the firm, which chalked up revenue of £63 million in the first half of this year but has yet to make a profit, could be valued at more than £1.65 billion. This was the upper valuation limit set by Heartland, the private holding company of Danish billionaire Anders Holch Povlsen, which had pledged to buy 10% of the deal.
The ink was hardly dry on a strategic partnership that the lender had signed with Alcentra, under which the BNY Mellon-owned specialist loan manager will buy $1 billion loans from Funding Circle’s US business over the next three years.
Revenue for the full year 2017 was £95 million, so the first half 2018 numbers looked encouraging. The firm has now lent £5 billion globally since it launched in 2010 and is a high-profile poster child for alternative lending in the UK.