Prospa decision to postpone $146m IPO stumps ASIC

Prospa’s decision to postpone its $146m IPO has left ASIC scratching its head over what prompted the fintech’s move.

Prospa founders Beau Bertoli and Greg Moshal. Picture: supplied

Online lender Prospa’s decision to postpone its $146 million IPO has stumped the Australian Securities and Investments Commission (ASIC), with the corporate regulator unsure about what has prompted the fintech’s move.

Prospa (PGL) on Wednesday deferred its ASX debut only 15 minutes before the stock was set to hit the market, leaving investors confused. The fintech, cited ASIC’s broader review into the small business lending space as the reason for its decision to postpone the listing by 48 hours.

“The JLMs (joint lead managers) and Prospa are seeking to clarify queries raised by ASIC yesterday in relation to Prospa’s small business loan terms, in the context of an industry wide review into financial services small business loan terms,” the fintech said on Wednesday.

However, The Australian understands that the corporate regulator, which met Prospa 24 hours before the original listing date, had not raised any specific red flags pertaining to Prospa’s prospectus.

ASIC has been in consultation with a number of players in the SMB lending space, particularly around the issue of unfair contract terms (UCT). However, The Australian understands that the review process is a fairly routine affair and not specifically targeted towards online SMB lenders like Prospa.

The regulator had asked for a copy of Prospa’s contractual loan documents to get a clearer understanding of how a typical loan is processed by the lender.

Prospa is yet to clarify whether it’s fully compliant with UCT law, which was extended to protect small businesses in November, 2016. It’s also unclear whether it needs to lodge a supplementary prospectus to ASIC before it can list on the market.

The ASIC review is running concurrently to the work underway to create a self-regulatory framework to govern online outfits like Prospa.

The unregulated nature of the online lending market had been a cause for concern in the lead up to Prospa’s IPO. With disclosure practices and interest rates varying wildly across the sector the lack of a code of conduct leaves many small business borrowers making an uninformed decision.

With 12,000 customers and a repeat business rate of 70 per cent, Prospa’s business model is predicated on being the lender of last resort for SMBs that need capital in a hurry. The fintech offers business loans of between $5,000 and $250,000 with no security required to access up to $100,000 and funding available within 24 hours.

The average loan size is $26,000 with an average term is around 11 months and SMBs don’t have to offer any security other than a personal guarantee.

However, the flexibility comes with caveats and Prospa lends at an average annual interest rate of around 40 per cent. It also charges establishment and direct debit fees that sit on top of the loan repayment and applies significant penalties if a borrower can’t make a payment on time. Those looking to repay their loans early can be required to pay all the interest for the unexpired period of the loan.

Prospa is planning to list about 25 per cent of its shares, which are priced at $3.46 each and give the fintech a market capitalisation of about $546m.