LONDON: Funding Circle will test investor demand for British peer-to-peer lenders in a listing scheduled for October and expected to value it at more than 1.5 billion pounds (US$1.94 billion).
As the first of Britain's new breed of financial technology firms to IPO, the company backed by Danish billionaire Anders Holch Povlsen and launched in 2010 hopes to raise around 300 million pounds from the listing on the London Stock Exchange.
Some in the financial industry are concerned whether upstart peer-to-peer lenders challenging the mainstream established banks will be able to weather an economic downturn and similar platforms in the U.S. have seen their shares tank after hitting problems.
Funding Circle said on Monday that now was the right time to IPO to demonstrate its maturity, transparency and governance to both investors and borrowers. The listing will include both new and existing shares and be open to retail investors, it added.
It said it will use the proceeds to strengthen its balance sheet, allowing it to take advantage of opportunities in existing or new geographies.
Povlsen, an investor in companies such as ASOS and Zalando, has agreed to take a stake of up to 10 percent up to a maximum valuation of 1.65 billion pounds, via his holding company Heartland A/S.
Peer-to-peer lenders work by matching borrowers with retail and institutional investors willing to lend for a return, with Funding Circle focusing on small and medium-sized businesses.
Capitalising on high-street banks' retreat from lending to that sector since the financial crisis, it has facilitated more than 5 billion pounds in loans to more than 50,000 companies across Britain, the United States, Germany and the Netherlands.
Competing with rivals like RateSetter and Zopa, Funding Circle has enjoyed quick growth and status as one of Britain's most promising fintech 'unicorns' - start-ups whose valuation has risen above US$1 billion.
But the firm is yet to turn a profit, losing 13.34 million pounds in the year to December 2016, its most recent filings show, compared to an 18 million pound loss the year before.
It also faces a crackdown from the Financial Conduct Authority, which plans to tighten the rules on the sector after poor practices by some firms.
RateSetter left the industry's trade body after revealing it had bailed out bad loans without disclosing this to investors, while in the U.S. founder and former chief executive of listed peer-to-peer lender LendingClub Corp borrowed from the lender to inflate its loan volumes.
(US$1 = 0.7726 pounds)
(Reporting by Simon Jessop and Emma Rumney, editing by John O'Donnell/Emelia Sithole-Matarise/Alexander Smith)