GLI Finance, the AIM-listed fintech investor that owns a portfolio of SME-focused alternative finance platforms, has reportedly offered a number of its P2P lending assets to competitors – for free. The company, founded in 2005, is one of the UK’s longest established players in the fintech space and its apparent haste to cut and run from its P2P lending investments is another blow to a sector still reeling from the recent collapse of Lendy in May.
GLI Finance owns a portfolio of small-scale, often specialist SME lenders – some outright and others through minority or majority equity stakes. TradeRiver and the UK Bond Network are among its better known brands. GLI has struggled over the past 4 years since its share price peaked at 64p in 2015. They are now worth under 4p. It’s already shut down a loss-making supply-chain finance platform this year after one of its borrower went into administration owing £1.1 million. It also blamed generally ‘poor market conditions’ for the move.
GLI, which operates under the brand of its Sancus BMS subsidiary, has obviously decided to move decisively to de-risk the rest of the business and its P2P lending platforms are clearly a casualty of in-house stress tests. The company itself has declined to comment to either confirm or deny the reports.
Investors in Lendy, around 20,000 of which had loaned as much as £152 million through the failed platform, are waiting to see what the company’s administrators will recoup for them. A pay-out of around £10 million is expected to be announced this week but there is a high chance that will be the extent of what they recover.
The P2P lending industry boomed over the past ten years, stepping into the void left open by the tightened lending restrictions that followed the 2008-09 international financial crisis. However, until now the question of how stable the format would prove in the event of a market downturn has not been put to the test. It’s gradually starting to be and initial signs are nervy to say the least.
Funding Circle, the first P2P Lender to go to IPO when it listed on the London Stock Exchange last year has seen its share price fall around 70% since. While there are currently no concerns around the viability of most P2P lending platforms, because they are generally just the intermediary between lender investors and borrowers, investors are getting more nervous about the rising % of defaulters. That would eventually have a knock-on effect on the platforms themselves, which take a commission for arranging loans. If there are not enough new investors to finance borrowers, the platforms themselves will also no longer generate serious revenues.