THE UK’S biggest peer-to-peer lenders will be facing millions of pounds-worth of annual costs when their flotation plans come to fruition, but experts say the benefits of going public outweigh the cons.
Funding Circle is reportedly seeking an initial public offering (IPO) this year, while RateSetter has said it would like to float in the longer term in order to solidify its position as an investor brand.
Analysts have suggested Funding Circle would be valued at over £1bn, meaning it would meet the LSE main market’s required minimum market capitalisation of £700,000.
Read more: Funding Circle poised for £1bn float
Funding Circle is likely to join the FTSE 250’s financial services sector, which is home to challenger bank Metro Bank, sub-prime lender Provident Financial, and mortgage and business finance provider Paragon Banking Group. All three have a premium listing, which requires them to meet standards over and above those set out in EU legislation, including the UK’s corporate governance code.
Listed companies are open to far greater scrutiny and face higher costs. Neil Glover, business development director for IPOs at EY, said a main market listing can cost between £1.5m and £3m a year. “A public company has to publish quarterly and annual results, employ an investor relations team and a financial PR firm, and have a non-executive board,” said Glover. “It also has to reveal management salary, profitability and the cost of sales. It is a very disclosing situation, particularly if it operates in a competitive environment.”
However, there are huge advantages to going public. It enables companies to obtain financing for organic and acquisition-led growth, enhance their visibility and prestige, broaden their shareholder base, and reward staff with shares. The owners can also release cash by selling down their shareholding.
James Clark, head of tech and life sciences at the LSE, said: “Joining a public market is one of the most significant decisions a business will ever take, but it demonstrates a company’s commitment to high standards and provides it with the means to access capital from the widest set of investors.”
A RateSetter spokesperson said: “We have been clear that our aim is to become a publicly-listed company, but we are in no rush. RateSetter is an investor brand and it would be natural for people to also be able to invest in the business itself.”
Funding Circle declined to comment.
This article featured in the February print edition of Peer2Peer Finance News. Read the magazine online here.