Prospa puts listing plans on ice, for now

Online lender Prospa’s much-hyped initial public offering has been pushed back even further

Prospa founders Beau Bertoli, left, and Greg Moshal.

Online lender Prospa’s much-hyped initial public offering has been pushed back even further, with the fintech temporarily ­putting its listing plans on ice.

Prospa and its joint lead managers — UBS and Macquarie — have decided to delay the IPO past its earlier 48-hour window, with no specific date scheduled at this point.

“The company and its JLMs have decided it is in the best ­interest of the company and new investors to postpone the listing and provide a briefing on the ­matters raised by ASIC in the context of the industry-wide review,” a company spokeswoman told The Australian. “A revised listing will be scheduled.”

The fintech was due to list at midday on Wednesday but notified the ASX just 15 minutes before then that the float would be shelved until today.

Prospa’s latest statement sees the fintech sticking with the corporate regulator’s review into the small business lending space as the reason for its decision to defer the listing.

However, industry sources told The Australian that the Australian Securities & Investments Commission had not raised any specific red flags with Prospa’s prospectus and the fintech’s last-minute change of heart might have more to do with the deal’s underwriters ­getting cold feet. ASIC has been in consultation with a number of players in the small business lending space, particularly around the issue of unfair contract terms (UCT).

WEB Business Prospa Pie graph

But it is understood the review process is a fairly routine affair and not specifically targeted at online small business lenders such as 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 is fully compliant with UCT law, extended to protect small businesses in November 2016. It is unclear why the fintech, which is advised by Herbert Smith Freehills, did not take the steps to become fully compliant ahead of the listing.

The ASIC review is running concurrently to the work ­under way to create a self-regulatory framework to govern online outfits such as Prospa, and an industry source said the fintech’s decision to forge ahead with the IPO before a code of conduct was formalised had raised eyebrows in the community.

Prospa’s hiccups have made a number of its peers in the small business lending space nervous, with some worries that a potentially high-profile failure could see them all tarred with the same brush.

Prospa has 12,000 customers and has dispensed over $500 million in loans. It is the market leader in the online small business lending category. But with an average annual interest rate of around 40 per cent, a heavy reliance on brokers and a slew of extra fees and charges, it operate differently to competitors such as Spotcap and Moula.

Prospa 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 and an average term is around 11 months, while borrowers don’t have to offer any security other than a personal guarantee.

Concerns about disclosure and opacity around fees have been raised in the lead-up to the IPO, but Prospa has previously stated that it had all its bases covered. “This is the right time for us to move given where we are in our growth trajectory. We are still going and we are very lucky to have the support from investors,” Prospa co-founder Greg Moshal told The Australian in May.

The subsequent postponement this week has caught some in the market on the hop, and the stock is expected to take a beating, provided the listing goes ahead, according to fund managers.

Prospa is planning to list about 25 per cent of the company’s shares for $146.5m.

The offer is open to institutions, retail clients of Macquarie Equities, Crestone and JBWere and eligible Prospa employees. There will be no general public offer of shares.

The IPO will see Mr Moshal and fellow co-founder Beau Bertoli retain their 34 per cent stake in their company. In addition, Australian-based venture capital investors Airtree Ventures has invested an extra $3m, giving it a stake in the company of 8.4 per cent.

SquarePeg — the investment fund founded by Seek co-founder Paul Bassat and backed by billionaire mogul James Packer — has invested an additional $10m, increasing its holding from 3.2 per cent to 4.4 per cent.