Prospa’s last-minute decision to postpone float raises questions

Prospa and its corporate advisers Macquarie and UBS were working last night to lock down the support of its major investors after its float was surprisingly shelved at the last minute yesterday.

Prospa planned to list about 25 per cent of its shares for $146.5 million but just 15 minutes before it was due to go live on the ASX it announced the sale would be delayed until tomorrow.

The shares were priced at $3.46 each and the company has a market capitalisation of about $546m.

Prospa said in a short statement that it and its advisers “are seeking to clarify queries raised by ASIC yesterday (Tuesday) 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 decision has raised questions of how the float could have been allowed to progress so far by UBS and Macquarie, while Herbert Smith Freehills was scrambling last night. The two investment banks refused to comment.

The float would be the second largest in Australia this year following Evans Dixon’s $170m.

DataRoom understands Prospa and ASIC are seemingly at odds on the processes that have unfolded since Tuesday afternoon. ASIC is understood not to have made any request for the float to be delayed and was not aware of the decision until it was announced to the market.

A meeting between Prospa and ASIC executives took place on Tuesday after the corporate regulator wrote to the company, as part of an industry consultation, about a month ago.

ASIC asked for a copy of Prospa’s contractual loan documents as it did for several other small lenders and fintech companies that specialise in business lending.

It’s believed Prospa’s loan rates, when fees are taken into account, are a sticking point for ASIC. The regulator’s questions are not related to the prospectus, which raises confusion over why the float was delayed, especially so close to its launch.

The best case for Prospa is that its float proceeds tomorrow, although its shares are expected to fall sharply on debut. The worst-case outcome is that the prospectus has to be redrafted and its float is delayed for several weeks.

Macquarie and UBS advisers were working last night to lock down the support of major investors and convince them the ASIC issues are not a material adverse change.

Fund managers who did not participate in the deal last night said they would consider the ASIC issues that have emerged since the IPO were material and would demand change.