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Funding Circle in Muted Post-IPO Start to Life on The London Stock Exchange

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Funding Circle, the British fintech ‘unicorn’ made its debut on the London Stock Exchange on Friday following the successful conclusion of its IPO. The IPO was heralded as a watershed moment for an exciting UK financial technology sector that has now produced a handful of start-ups that have achieved valuations exceeding the $1 billion threshold that marks ‘unicorn’ status in tech and investment jargon. However, while the IPO can be considered as a qualified success in the end, there is an argument that it rather limped over the line in the end in terms of meeting the criteria for that label.

A final IPO market capitalisation of £1.5 billion was achieved in the end, which was at the lower end of the range that shares had been provisionally priced at. A 440p to 460p range had been put forward and coming in at the top of that would have valued the company at £1.8 billion. However, last week the bankers leading the IPO opted to narrow the range with the final IPO price achieved coming in right at the bottom edge of 440p a share.

And while it might have been hoped that more conservative pricing would lead to an initial bounce when the shares went live on Friday, they finished the day flat after muted interest. Those investing online and digesting the first day of trading over the weekend have also obviously not been convinced that Funding Circle represents a bargain at the more conservative pricing level. Today the Funding Circle share price has been largely trading at between 432p and 435p, having slid from Friday’s close.

Despite the IPO’s ‘success’ meeting close to the minimum qualifying criteria, those who have already invested online in the stock, which was made available to retail investors with a minimum £1000 commitment, will realise that it is the share price’s performance over next couple of years that will count. The alternative lending platform that specialises in peer-to-peer lending, is still a loss-making operation – down £16.3 million on revenues of £63 million over H1 2018. However, it is growing quickly and much will depend upon how wisely the £300 million raised by the public float is spent. Much of it has been earmarked for international expansion.

Despite the fact that the IPO did not generate quite the level of investor enthusiasm that may have been hoped for, experts and analysts of the UK fintech sector have optimistically declared that just by closing it within the initial range demonstrates an industry ‘coming of age’. Fintech challengers to the established financial services industry grew up out of the vacuum left by the 2008 international financial crisis. Other successful British fintechs include TransferWise and Revolut, the foreign exchange transfer and current account specialists and app-only banks Monzo and Starling.

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Paul

The author Paul