P2P giant Funding Circle banks on £1bn float
Funding Circle, the UK's biggest peer-to-peer lending platform, is preparing to hire advisers to oversee a £1bn-plus London flotation.
Sky News has learnt that the company has told investment banks that it will hold a beauty parade towards the end of the first quarter of 2018, with a listing possible as soon as the late autumn.
A flotation of Funding Circle, one of Britain's most prominent financial technology companies, has been anticipated for some time, and will stir enormous anticipation among City bankers.
Funding Circle, which launched in 2010, has matched lenders to tens of thousands of small business borrowers, facilitating loans totalling more than $5bn globally during its seven-year existence.
Its rapid growth has earned it the status of one of the UK's few fintech "unicorns" – companies which have achieved a prized $1bn price-tag.
Sources said this weekend that it was likely to comfortably exceed the $1bn valuation it hit when it raised £82m of new funding in January from investors led by Accel, the blue-chip tech company backer.
A syndicate of investment banks is expected to be hired by the spring to steer the flotation, they added, with some existing investors believing the company could be worth as much as £2bn.
Funding Circle's other big shareholders include funds such as Baillie Gifford, the Edinburgh-based manager, DST Global, Index Ventures and Rocket Internet.
Temasek Holdings, the Singaporean state-owned vehicle, is also an investor.
Funding Circle was set up by Samir Desai, Sam Hodges and James Meekings.
They identified opportunities offered by new technology to provide access to finance for businesses frozen out by mainstream banks, while also promising superior returns to investors.
The P2P sector, as it has become known, has seen an explosion in the number of providers and the range of products, with the likes of Funding Circle launching so-called Innovative Finance ISAs.
The company has also struck partnerships with Royal Bank of Scotland and Santander UK.
Peer-to-peer lending has come under growing scrutiny as the asset class has expanded, with rivals including Ratesetter recently following Funding Circle by gaining full authorisation from the Financial Conduct Authority.
However, some prominent City figures, including Lord Turner, the former FCA chairman, have raised concerns about the industry's lending standards.
He subsequently moderated his warning, acknowledging that peer-to-peer lending was "likely to become a stable, significant and useful part of our total credit supply system".
If an initial public offering is successfully completed, it will value the stakes of the three Funding Circle founders in the tens, and probably hundreds, of millions of pounds.
It would also be likely to crystallise a more modest windfall for Eric Daniels, the former chief executive of Lloyds Banking Group, who sits on the company's board as a non-executive director.
Funding Circle is chaired by Andrew Learoyd, a former Goldman Sachs banker, who has been involved with the company since its launch.
It is unclear whether he plans to remain at the helm beyond the point of an IPO.
The company's growth trajectory suggests it is likely to benefit from strong investor interest.
It has lent more than £1.7bn this year, with the US and Continental Europe showing rapid expansion.
Mr Desai said the growth suggested that Funding Circle was "quickly becoming the first choice for finance for small businesses globally", and claimed that the company's lending activity had helped to create 100,000 new jobs.
Funding Circle already has a presence on the stock market, having listed an SME income fund on the London Stock Exchange in 2015.
A successful float of the wider group, which would emulate that of rival Lending Club in the US in 2014, would spark a race among UK competitors to go public.
Other fintech unicorns such as TransferWise are also targeting floats over the next two years.
If it takes place in 2018, Funding Circle's listing will undoubtedly be among the most prominent in the London market over the coming year.
This week, the LSE hailed its strongest performance in raising money from IPOs for three years, with investors ploughing £15bn of new capital into 106 companies making their stock market debuts in 2017.
The precise sum that Funding Circle will seek to raise by selling new shares in its flotation is unclear and will not be determined until much closer to the launch.
More from Business
Investors said this weekend that they expect it to seek hundreds of millions of pounds of new money.
A Funding Circle spokesman declined to comment.