Funding Circle pre IPO offer

Alexland

Did the prospectus confirm if they would retain any bargepoles?

aroominyork

Thanks, bowlhead. I have never read an IPO prospectus but from what I gather the last sentence means the founding investors will realise a profit (nothing wrong with that) and the rest means anything and nothing and could include fancy Xmas dinners or expanding into Dubai.

bowlhead99

aroominyork wrote: »

Thanks, bowlhead. I have never read an IPO prospectus but from what I gather the last sentence means the founding investors will realise a profit (nothing wrong with that) and the rest means anything and nothing and could include fancy Xmas dinners or expanding into Dubai.

The pre-IPO shareholders were selling up to 25% of their holdings, at the same time as new shares were being issued.

If you are interested, there is a 259-page prospectus which goes into detail about the business and the mechanics of the fundraising.

If you are not interested and don't understand the sector or mechanics of an IPO and just want to sh1tstir, you can make flippant comments about how the owners are taking the money and running, or raising new capital from mugs so they can make more loans than their customers want to finance, and how the prospectus is a meaningless sop to regulation and just a way of getting new cash for a christmas party.

However, that latter attitude is unlikely to result in people trying to distill complex documents and industry analysis into something more user-friendly and spoonfeed you the actual facts to help you learn anything about what's going on.

Malthusian

Unnecessarily harsh. Once the new investor money is in Funding Circle's hands, there is very little to stop them spending the money on fact-finding trips to Dubai if they are so inclined. Certainly not the number of pages in the prospectus, unless you plan on hitting them over the head with it before they board. That is one of the risks investors in any IPO take. I am not saying that the directors of FC are likely to.

The answer to ARINY's original question is that the funds are to be used to prop up the balance sheet, allow the company to continue to survive as a loss-making company until the long term, and pay higher salaries to directors ("assist in recruiting, retaining and incentivising key management and employees"). Most of the other reasons are fluff or circular (raising money to show they can raise money).

You pays your money and takes your choice.

aroominyork

Malthusian wrote: »

The answer to ARINY's original question is that the funds are to be used to prop up the balance sheet, allow the company to continue to survive as a loss-making company until the long term, and pay higher salaries to directors ("assist in recruiting, retaining and incentivising key management and employees"). Most of the other reasons are fluff or circular (raising money to show they can raise money).

[FONT=&quot]Post #18 wasn’t my finest, but it’s interesting to know FC is loss-making: £35.3m on revenues of £94.5m in 2017. Discussions on this forum often describe the dual risks of p2p – defaults by borrowers and platform risk – but I don’t recall reading about ongoing operating losses rather than, as I thought was the risk, the prospect of a recession reducing incoming funds and increasing the cost of chasing outstanding loans. Are all p2p platforms similarly loss-making?[/FONT]

bxboards

aroominyork wrote: »

[FONT=&quot]Are all p2p platforms similarly loss-making?[/FONT]

Almost all.

This is why the shares to me are so unappealing. If have made no profit lending other peoples money for the last 5 years or so (losses from defaults come from their lenders pockets, not theirs), I can't see what has changed, or what will change.

I don't see much scope for growth, there are already too many P2P sites chasing too few quality borrowers.

aroominyork

bxboards wrote: »

Almost all.

This is why the shares to me are so unappealing. If have made no profit lending other peoples money for the last 5 years or so (losses from defaults come from their lenders pockets, not theirs), I can't see what has changed, or what will change.

I don't see much scope for growth, there are already too many P2P sites chasing too few quality borrowers.

Then it seems to be a question of what proportion of their costs are short/medium-term marketing costs to build the brand and sector (as FC claim) and what proportion are fixed or variable operating costs. If the platforms all have fixed operating costs which are disproportionate to the business model, we may see some mergers take place.

Malthusian

aroominyork wrote: »

If the platforms all have fixed operating costs which are disproportionate to the business model, we may see some mergers take place.

Not a simple matter as it isn't just a case of bolt the two businesses together, sack a load of staff and bob's your uncle. You need due diligence to make sure that you aren't merging your business with a load of junk, and the company you're merging with needs to do the same on you. I can imagine this being a painful process where two P2P platforms are concerned - probably the first time a due diligence specialist will have been let into the building.

No, if it was me I would ask the punters on the mailing list if they wanted to invest (as they've already self-selected as being willing to invest in businesses of dubious soundness) and hope to stagger on until the firm is big enough to IPO.

How much marketing can a P2P firm need? A P2P firm is basically an office with two doors, one with a laminated poster saying "E-Z Loans - few questions asked - apply within" and the other saying "6-7% per annum interest - apply within". Once you've stuck those two posters up it's a case of "if you build it, they will come".

Funding Circle has enough critical mass to be widely promoted in the newspapers and even on MSE by Martin Lewis. I fail to see what more advertising can really achieve. As Bxboards says, there are already too many P2P firms chasing too few quality borrowers. And if you can't get the borrowers there is no point spending lots of money to attract the investors.

aroominyork

But if the business model is inefficient until a certain (yet to be seen) scale is achieved, the market will have limited tolerance for endless ‘prop us up’ IPOs. If the firms’ losses are partly because there are too many firms chasing too few borrowers, one of the solutions is to have fewer firms doing the chasing. Surely this is just part of teething for a new sector, as would opening their books to each other for due diligence.

bxboards

The shares are dropping like a stone from the launch price.

Obviously early days and shares being a long term investment and all that, but it looks like a lot of folks have got cold feet - including many of FC founders who have sold a lot of their own shares quick smart...