Seems like a rather risky business to me personally, with no profits for the last 7 years of operations (although their accounts go as far as 2010, they only started real operations in 2012).
Whilst the article is stating the following:
In the year ended 31 December 2017, Funding Circle posted revenues of £94.5 million, compared to £50.9 million in the previous year. In its 2016 full year results, published September last year, the company narrowed its losses to £35.7m, down from £36.9m in the in the previous year
The Companies House filings (page 11 of the actual PDF) significantly contradict the AltFi’s information - revenue in 2016 being £39m (not £50m) and operating losses being £53m (not £37m). Even if they meant net loss, the figures would still have not added up.
Interestingly, Companies House do not have their year 2017 yet (usually posted in October year after, i.e. we could expect 2017 accounts in October 2018), and, given discrepancies AltFi have already shown, I would be reluctant to take revenue growth and reduced losses for 2017 for granted and rather wait for the official accounts to be released.
This might be of interest for anyone who’s interested in how the process of a company going public works, in terms of issuing shares, who can buy them, how many they have to offer, how much the CEO will make etc. There’s some details of the lock up period (the time period when certain employees can’t sell their shares), that has been arranged too @Peter
What typically causes a price to rise on IPO day? Is there a segment of investors excluded from participating in the IPO and therefore have to buy on open market thus pushing the price up? Otherwise if people are optimistic about the company why not just participate in thr IPO?
The lossmaking company — which connects small businesses seeking credit with private and institutional investors willing to lend to riskier borrowers for potentially higher returns — originally set a price range of 420p to 530p per share for its IPO. This would have valued it at up to £1.8bn.
Funding Circle, which is the first peer-to-peer lender to go public in the UK, has now narrowed that price range from 440p to 460p, giving a maximum valuation of £1.5bn.
I’ve invested with them. One of the loans I’ve provided is with a property company and it’s currently 9 months late being paid back. The recoveries team are on it, however, I have no view when I will get my investment back.
I’ve not had the best experience. I run a business too and I get lots of marketing from them about offering loans with minimal checks.
It’s all about volume, making as many loans as possible as that’s how they make their money. Having experienced their conduct I wouldn’t touch this investment. I think their business model is broken
Thank you for sharing your expriences, it good to hear someone who has invested with them. It’s is a shame that you have had a bad experience and I hope that good news comes out of it in the end. Good luck!
I almost invested money with them a year or two ago but then read multiple horror stories about them investing in property over the last few years, and loans being underwater, either default or late payment and after opening an account didn’t like they way you have no control over who you are lending to (I think they make it harder to work out what you’re invested in nowadays). They seem to lend to lots of businesses, not individuals - as our banks have discovered, this can go very wrong when the risk is mis-priced, and there is a big risk with things like companies just going bust, esp during a recession. I believe they’ve tried to exit property loans this last year, but think this is a very risky sector (p2p or more like p2b for funding circle) and it is highly likely they won’t survive the next recession in the UK. So I’m afraid I wouldn’t invest in this stock.
I wanted to get in Funding Circle, as I was reading their results like a month or two ago, and their business model seemed reasonable, where they charge a percentage on origination. But the problem with this kind of business model is that it is based too much on volume of origination, and it creates perverse incentives to originate even more loans, against less credit worthy borrowers, just to collect fees (because there’s no downside for Funding Circle if a loan fails to my understanding, only reputational damage, but no financial damage, at least not immediate)
But it also goes back to Taleb’s skin in the game: This company has an incentive structure that I find unappealing for long term investment, and they do not seem to be particularly keen on maintaining high performance of the loans they offer, since once originated they no longer have anything much to gain from it, and if they lose, it’s the investors’ loss.
I have a Funding Circle ISA from 2017, the current annual return is 3.3%. When I signed up, the advertised projected return was 7%. I wanted something a bit safer than a stocks ISA that year, but in the same situation now, I would never invest with Funding Circle and look at Bond-ETFs instead (through freetrade, natch).
Funding Circle returns have not been good enough, and are too illiquid. It takes ~60 days to sell your loans. In chasing volume, quality and liquidity have dropped, I would rather buy safer older debt from other investors, but Funding Circle automatically buys the new jank.
I’m not sure why their shares have been doing so badly. It’s just a loans company, shouldn’t be that difficult for them to make money. Zopa is profitable.