FUNDING Circle is coming up to its one-year anniversary as a publicly-listed company, after an eventful 12 months which has seen its share price plummet to less than a third of its offer price.
The peer-to-peer business lender began conditional dealings on the London Stock Exchange on 28 September before being officially admitted to the bourse on 3 October. It launched with an offer price of 440p per share, giving the firm a valuation of £1.5bn.
However, its market capitalisation as of 17 September has since dropped to £348.7m, with its shares now trading at just over 100p.
While some commentators have been quick to attribute the decline to issues with Funding Circle or the wider P2P industry, others have pointed out the challenging macroeconomic environment and typically shaky starts for many newly listed companies.
Analysts have said that share price performance in the first year of listing can be a “mixed bag.”
“You only have to look at this year where well-known US companies such as Uber and Lyft took part in highly anticipated and much watched initial public offerings (IPOs),” Tom Rosser, investment research analyst at The Share Centre, said.
“Share prices have struggled since, with both companies down over 26 per cent.
“Contrastingly, plant-based protein producer Beyond Meat who listed at the end of last year has seen its share price soar 476.8 per cent.
“It seems those companies where large institutions are involved to bring the stock to market tend to suffer post-IPO as the offer price is often rather lofty.”
Funding Circle posted a 29 per cent rise in first-half revenues last month but downgraded its full-year revenue guidance from 40 per cent to 20 per cent ahead of the update.
It has tightened its lending criteria to move away from riskier loans, a move which was endorsed by ratings agency DBRS, and recently announced a fourth securitisation deal – its first in the US.
“On the face of it Funding Circle is a fundamentally sound company offering a very valuable P2P lending service which plugs the funding cap for many small businesses,” Rosser added.
However, the analyst also noted that the firm is not forecast to make a profit until 2021, which puts its initial market price into question.
But Jonathan Minter, of analysis firm Intelligent Partnership, says Funding Circle’s stock market performance is less relevant to P2P investors.
“For those investing through Funding Circle, the fact the platform is pro-actively tightening its lending criteria ought to be seen as reassuring news,” he said.
“Also reassuring is the fact that its projected bad debt range and annualised return range remained stable.”
This article featured in the September issue of Peer2Peer Finance News, now available to read online.