RateSetter’s low sale price to Metro Bank has led analysts to query whether the peer-to-peer lender was under pressure to do a deal.
It was confirmed on 3 August that Metro Bank was acquiring RateSetter in a deal worth up to £12m – far below the £25-50m estimates that were initially floated.
Neil Faulkner, chief executive of P2P analysis firm 4th Way, pointed out that backers such as Woodford Investment Management and Artemis Fund Managers have put at least £43.3m into the platform.
“If RateSetter is sold to Metro Bank for no more than £12m in total, and if RateSetter’s founders are not allowed to strip its capital reserves for themselves, it looks like a terrible result for RateSetter’s current owners,” Faulkner said.
RateSetter’s investors valued the platform at more than £200m. In April 2019 the platform revealed that it had secured £200m from ISA investors, and its total lending volumes reached £4bn earlier this year.
“The decision taken to sell the business at the height of the Covid crisis strongly suggests there was pressure to do a deal,” said John Cronin, an analyst at Goodbody.
“The news that RateSetter had entered into an exclusivity arrangement with Metro Bank came a few months after the launch of the sale process in our understanding – so, it is likely that there were no better offers on the table at that time.”
Faulkner said that Covid-19 defaults may have impacted RateSetter’s sale price, but suggested that “the sale price has less to do with Covid-19 defaults and more to do with the profitability of the P2P lending industry itself.”
“Being an investor who buys shares in some P2P lending companies could be quite similar to being an investor in airlines or car manufacturers,” Faulkner added.
“All three industries make incredibly useful products that are wonderful for their consumers. In the case of P2P lending, its consumers are the lenders and borrowers.
“But, over the very long run, the airline and car industries have made disappointing investments for their shareholders. This is because, on aggregate, the bulk of the rewards from these industries have gone to the consumers, not to its owners.
“P2P lending could be the same.”