The fintech sector is poised for a flurry of initial public offerings (IPOs), with firms such as Zopa Bank preparing to float.
Last month, Zopa Bank – a challenger spun out of the world’s oldest peer-to-peer lender – confirmed a $300m (£220m) pre-IPO funding round to boost its balance sheet and help it meet capital requirements. It is expected to launch its IPO next year.
P2P lending platforms Assetz Capital and Shojin Property Partners have also signalled ambitions to float in the coming years.
Myles Milston, chief executive of Globacap, which helps private companies raise funds, has forecasted additional fintech IPOs.
“Fintech is starting to reach a maturity point where we’re getting some big companies now like Zopa and Wise; I think we’re at that point in the cycle,” Milston said.
“Fintech 10 years ago was a relatively new concept but it has evolved massively over the past 10 years. Since the 2007 recession, the sector has really bloomed and I expect we will see more firms move towards becoming public.”
Ekaterina Chmatova, senior manager, capital markets at PwC, said that fintech IPOs are “just getting started” and predicted more stock market floats from the sector.
“I think that fintech IPOs globally are just getting started, we have already seen a number of high-profile transactions in the third quarter such as Wise’s direct listing in London and Robinhood’s IPO in the US,” said Chmatova.
“And as the global fintech market continues to grow at a pace, we will see a number of issuers coming to the public market for funding or liquidity.
“However, innovation could be the ethos of the fintech IPO wave as these disruptors would look to access the public markets on their own terms, be it direct listings, focus on retail participation, or other changes to a classic IPO structure – and the options for funding are wider than ever.
“With that said, the P2P sector is challenging and in the midst of increased scrutiny and regulatory change which may dampen the sentiment towards IPOs for this particular segment.”
Investment expert Adrian Lowcock said that IPOs raise the profile of companies but warned that they also draw additional scrutiny and focus. He said other fintech and P2P lending platforms should wait and see how Zopa is received by the market before undertaking an IPO.
“The UK has been a mixed bag for IPOs recently and especially in the technology space with Alphawave, Deliveroo and most recently THG suffering as listed companies,” he said.
“Technology-led companies in particular seem to find it difficult. Add in the issues that have surrounded P2P lending in recent years and an IPO for Zopa faces some challenges to get investors on board. However, the recent capital raise gives the company resources and time, while the commitment to focus on a sustainable and profitable business model will help somewhat.
“Other fintech, P2P and alternative lenders might well wait to see how Zopa is received by the market, learn what they got right, or wrong, before going down the same route.
“There is a lot of risk being amongst the first to IPO so waiting to see how one or two are received in this climate might be an advantage.”
Funding Circle became the first UK P2P lending platform to float in 2018 and has had a bumpy ride since its £300m IPO.
Its shares began trading at 440p but slumped to 334p on their first morning and continued to fall since then, going as low as 44.2p last year.
However, Funding Circle has recently shown signs of recovery, with its share price up around 126 per cent over the past year to 165p as of 21 October, although this is still far lower than its market debut.