News & Analysis

2ND TIME LUCKY: Small business lender Prospa is raising $110 million in another IPO attempt

- May 16, 2019 3 MIN READ

 

  • Fintech Prospa launched in 2012 after its co-founders grew frustrated with access to small business loans from traditional banks
  • The company is raising $110 million from institutional investors, valuing the business at $610m
  • Its backers include Square Peg, Airtree and AustralianSuper. 
  • This is Prospa’s 2nd attempt to float after an IPO was pulled at the last minute 12 months ago over regulatory concerns

 

Online small business lender Prospa plans to float on the ASX next month raising $109.6 million in an initial public offering (IPO) that will value the company at $610 million.

The shares will be offered at $3.78 each to institutional investors in Australia and New Zealand. No shares will be offered to the general public. The prospectus was lodged on May 16 and the offer closes May 31.

The float comes seven years after Greg Moshal and Beau Bertoli founded the lending business with seed funds from London-based Entrée Capital, and wrote their first loan for $20,000.

This is Prospa’s second attempt at listing and is scheduled for June 11. It comes nearly 12 months to the day after fintech startup suddenly pulled its $148 million June 2018 IPO just 15 minutes before it was set to happen amid questions from corporate regulator ASIC (Australian Securities and Investments Commission) about Prospa’s compliance with industry lending regulations.

The company subsequently became one of the founding signatories to the Code of Lending Practice in the wake of the financial services Royal Commission.

While saying the float was postponed indefinitely, the business went ahead with a $43 million pre-IPO funding round from existing VC investors, led by Entrée Capital with AirTree Ventures, Square Peg Capital, and superannuation fund AustralianSuper.

A book build by Crestone, Bell Potter Securities and Macquarie Equities clients was confirmed on Wednesday afternoon, paving the way for the float to go ahead.

The deal is fully underwritten by Joint Lead Managers Macquarie Capital and UBS.

In March, Propsa announced it had made a total $1 billion in loans to 19,000 small businesses, beating the guidance in its abandoned 2018 prospectus by 13%. At the time the company denied it was preparing to float.

New loans CY2018 increased by 51% year-on-year to $436 million.  June’s IPO adds $34 million to the year-old valuation of $576 million at the time of the previous attempt.

Prospa says a majority of funds raised will go towards the equity portion of the growing loan book and working capital, investment in new products and geographies and to repay corporate debt.The company expanded into New Zealand last year and delivered NZ$12.5m originations to 31 March, 2019.

It also launched a new Line of Credit for small business offering between $2,000 and $25,000, as well as “Prospa Pay” a Buy Now, Pay Later B2B payments solution for small businesses to buy items from approved vendors.
Co-CEO Beau Bertoli said the financial services sector was changing rapidly and small business lending is a substantial market opportunity underserved by the traditional banking system.
“Through the launch of our new cash flow products and by entering into new geographies, we will be able to reach even more small businesses looking to grow and run their business and help them pay for goods and services, quickly and easily,” he said.

“Over the past few years, Prospa has strategically invested in people and technology. Prospa also designed its technology platform and workflow to be scalable, flexible and support its growth strategies.”

Co-CEO Moshal said their own experiences with a “slow, cumbersome and disheartening” finance system led them to start the business in 2012.

“Prospa’s success has been the result of a group of smart, talented and passionate people united around a common mission to keep small business moving,” he said.

The duo’s letter accompanying the prospectus claimed Prospa’s lending to nominal Australian GDP since 2013 is now estimated to be more than $4 billion, maintaining more than 57,000 jobs, from tradies, to seahorse farmers and accountants.

Prospa Chairperson Gail Pemberton said the business designed its technology platform and workflow to be scalable, flexible and support its growth strategies.

Following the float, shares owned by Entrée Capital, Moshal and Bertoli will be subject to escrow until the Company’s financial results for FY2020 are released to the ASX. Square Peg and Airtree are subject to escrow until the ASX has the FY20 half year accounts to 31 Dec, 2019.

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