Prospa float boosts market

Prospa’s buoyant ASX debut has given the market for floats and investors a much-needed boost.

Joint Prospa chief executives Greg Moshal, left, and Beau Bertoli at the ASX in Sydney. Picture: John Feder

Prospa’s buoyant ASX debut has given the market for floats and investors a much-needed boost, as the online business lender said demand hadn’t waned as the domestic economy slowed.

Against the backdrop of few large initial public offerings this year, Prospa’s stock surged to $4.55 yesterday before finishing 18 per cent higher at $4.46.

That compared to an IPO price of $3.78 and came as the local bourse climbed to its highest close in almost 12 years.

Prospa, which is led by joint chief executives Greg Moshal and Beau Bertoli, is the biggest Australian IPO so far in 2019 and the largest since the Qualitas Real Estate Income Fund’s float in November, according to data provider Refinitiv.

When offshore-based companies are included, Refinitiv ranks US-domiciled Life360’s IPO as the biggest in 2019 and Prospa at number two.

It’s second time lucky for Prospa after the fintech lender had to abandon last year’s planned listing minutes before the stock was due to start trading, to deal with regulatory concerns.

Mr Bertoli was upbeat yesterday, saying Prospa was ready to embark on the next leg of its growth plans after a seven year journey.

“The size of the (small business lending) market and unmet demand is very big,” he said, adding that listing would help the company execute its plans faster.

Mr Bertoli added that Prospa had a “finger on the pulse” in the small business market and was yet to see any worrying signs despite the economy slowing.

“Nothing is concerning us about the performance of the small business economy.”

But Cyan Investment Management’s director Dean Fergie believes the real test for Prospa will come in the trough of an economic cycle.

“It is not until you go through a whole business cycle that you can figure out the longevity of these businesses,” he said.

“There’s enough of a grave yard of other businesses that have really struggled.” On the federal government’s $2 billion ­securitisation fund, which aims to free up cheaper funding for ­smaller lenders and businesses, Mr Bertoli said Prospa had seen the draft rules and supported the initiative.

“It is a problem (access to business lending) that has a very big multiplier effect,” he said of the benefits to the economy of freeing up access to credit.

The securitisation fund is due to start operating in July.

Prospa has come under fire from industry players for charging markedly higher interest rates than banks.

However, Mr Bertoli said as the group’s cost of funding reduced that would flow through to borrowers.

Prospa focuses on lending to small businesses in amounts of $5000 to $300,000, and doesn’t require property or other security for loans of up to $100,000.

It also offers other products including a line of credit to small business and its total loan book sits at more than $300 million.

Certain existing shareholders were allocated shares in Prospa’s institutional bookbuild, including Entree Capital and industry funds giant AustralianSuper.

Prospa is also backed by venture capital firms AirTree Ventures and Square Peg Capital.

The float was being viewed as a litmus test for venture capital exits on the ASX. Prospa raised almost $110m at $3.78, which gave the company a market capitalisation of $609.9m.

At yesterday’s close the company was worth about $720m.

The company’s prospectus forecasts a pro-forma financial year 2019 net loss of $1.5m or a loss of $16.9m on a statutory basis.

For calendar 2019 a $2.6m profit on total revenue of $156.3m is expected.

The IPO funds are being used for technology and product development, working capital and to repay debt.