Lender Plenti’s shares pummelled in ASX debut

Plenti’s shares tumbled on its ASX debut, weighing on IPO investor sentiment.

Plenti CEO Daniel Foggo is upbeat on the company’s prospects on the ASX, despite COVID-19 challenges. Picture: John Feder.

Shares in non-bank lender Plenti tumbled on its ASX debut, casting fresh doubt over prospects for the initial public offering pipeline as investors closely scrutinise impacts stemming from COVID-19.

Carsales.com-backed Plenti - formerly RateSetter Australia - saw its shares slide almost 22 per cent to $1.30 on Wednesday, down sharply from a listing price of $1.66. The stock had slumped even lower during the day’s trading and performed poorly despite the S&P/ASX200 notching its strongest daily gains in nine weeks.

Investors were rattled by Plenti’s exposure to the lending market given an expected spike in loan losses due to a tough economic climate induced by the pandemic. Plenti is targeting growth in digital car and personal loans and financing for renewable energy products for homes.

As part of the listing process, the local company rebranded and gave notice in August to sever a licence agreement with RateSetter UK.

Plenti chief executive Daniel Foggo stressed the company’s growth trajectory on Wednesday and said against the backdrop of COVID-19 it remained focused on lower-risk prime borrowers.

He said the number of Plenti customers that had entered loan repayment pauses was tracking at about half of its peers.

“We are clearly shifting our loan book from just personal loans to increasingly automotive and renewable (energy) loans, and from a credit perspective even over the last six months, it (loan portfolio) continues to get more robust,” Mr Foggo said in an interview.

“This (IPO) was all about raising new capital to further accelerate our growth, and we’ve moved to deliberately change our funding mix over time from exclusively a peer-to-peer funding model … to now really diversified.”

Plenti’s prospectus showed that while credit losses were less than 1.75 per cent since its 2014 launch, the proportion of loans on COVID-19 repayment pauses were dominated by personal finance.

Personal loans accounted for 5.1 per cent of deferrals, auto loans stood at 3.9 per cent while finance related to renewable energy were almost 1 per cent of the total.

Plenti also remains loss-making as it seeks to scale up and gain greater market share in its target segments. In an ASX update on Wednesday the company said it continued to “trade well” since lodging its prospectus last month.

But as a host of other small companies, including some in financial services prepare ASX listings, fund managers say Plenti’s poor first-day performance will weigh on sentiment.

“The door (for IPOs) is just not as wide as it used to be and is starting to close a little,” Cyan Investment Management’s Dean Fergie said.

“The market was super-hyped up about a month ago... a bit of froth has now come out of the market after it was flooded with new issues.”

The new issuance Mr Fergie was referring to also includes capital raisings as ASX companies sought to shore up their balance sheets during the pandemic.

Lender Harmoney, online broker Lendi and larger floats such as Macquarie Group-backed Nuix are hoping to join the local bourse in coming months.

Opal Capital Management‘s Omkar Joshi said: “It‘s not helpful (Plenti aftermarket trading), but by itself it’s not enough to impact the IPO pipeline.

“Market volatility over the past month is more of a concern.”

Technology and financial stocks such as those in the buy-now-pay-later sector have been caught up in market swings.

Mr Foggo, Carsales.com, Myer Family Investments, Five V Capital and Federation Asset Management are among Plenti’s ASX shareholders. The 14.1 per cent held by RateSetter UK transferred to the co-founder individuals - Peter Behrens and Rhydian Lewis - given Metro Bank acquired the British operations this month for initial consideration of £2.5m ($4.4m). As much as £9.5m can be paid after deal completion.

The IPO raised $55m from institutional and retail investors, including some participants on Plenti’s peer-to-peer lending platform. The raising delivered the group a market capitalisation of about $280m at the listing price.

Peer-to-peer lenders connect borrowers and investors.

In its energy lending operations Plenti has, though, been the subject of a probe related to a 2018 $100m funding deal with the federal government’s Clean Energy Finance Corporation for South Australia’s home battery scheme.

Mr Foggo said he was confident the inquiry would show due competitive process was followed, but several rivals have raised concerns there was no deal tender.

“One would hope so,” Mr Foggo said of whether the audit into the matter would be made public.

Mr Foggo had last year targeted hitting $1bn in loans, but Plenti’s tally stands short of that milestone at $870m. It has about $400m of loans outstanding.

Plenti’s compound annual revenue growth from financial year 2018 to 2020 stands at more than 60 per cent. Loan originations in fiscal 2020 totalled $286m and the prospectus forecast is for loan originations in the 12 months to the end of September of $318m.