Harmoney shareholders to cash in nearly $24m

AUCKLAND: Harmoney shareholders, including the trust fund of founder Neil Roberts, Heartland Group and Trade Me, are set to cash in some of their investment when the online lender lists on the Australian and New Zealand stock exchanges.

Existing shareholders will get $A22.5 million ($23.9 million) of the $A92.5 million set to be raised through the initial public offering, a prospectus for the offer released on Friday shows. It is due to list on November 19.

Major shareholders will sell a portion of their shareholding into SaleCo — a special purpose vehicle set up to facilitate the process — which will then onsell the shares as part of the offer.

Mr Roberts, who founded Harmoney in 2013 as New Zealand’s first peertopeer lender, will remain the biggest shareholder through his trustee company but will see his stake in Harmoney drop from 27.5% to 18.4%.

Michael Lookman and associated family trusts will reduce their share from 12.6% to 9%.

Kirwood Capital Partners — an Australian private equity investor which bought a stake in the business a few years back — will go from 12.1% to 8.7%, and NZXlisted Heartland Group will reduce its stake from 11.8% to 8.4%.

Trade Me will drop from 10.6% to 7.6%.

Only 26.2% of the newly listed company will be owned by new shareholders, and there will be restrictions on when many of the existing shareholders can further sell their shares.

Of the total shares held after listing, 72% will be under escrow. Affiliated shareholders will have to hold on to their shares until the day after the company’s fullyear results are released to the market for its June 2022 financial year — likely in August 2022.

Unaffiliated shareholders will have to hold on to theirs until the day after the December 2021 halfyear results are released to the market.

Of the $70 million of the proceeds received from new shares issued, it will use $61.4 million to invest in the business and $8.6 million to fund the offer.

According to the prospectus, since launching in August 2014, Harmoney has lent more than $1.7 billion to more than 46,000 borrowers and has grown its total loan book to $480 million.

Chairman David Flacks said the changing nature of the loan market continued to present an attractive opportunity for the business.

‘‘Harmoney’s proven track record of originations, scale benefits achieved through its technology platform, and machine learning credit scorecard provide an advantage for it to emerge as a leader in the personal lending space.’’

The company has 60 staff in its New Zealand and Australia operations, with a head office in Auckland — about half of its staff are in the product and engineering team.

Mr Flacks said the offer was to provide Harmoney with capital to fund growth opportunities and provide access to capital markets which it expected would better allow it to pursue future growth opportunities to improve its financial flexibility.

The company’s prospectus said the total personal lending market in Australia was $A150.1 billion as of July, and nonbank had increased its share of the personal lending market from 9.2% in May 2015 to 46.9% in November 2018.

In New Zealand, the personal lending market was about $A14.9 billion, and nonbank lenders had increased their share of the market from 31% in January 2014 to 35% in July this year.

The company typically loaned from $2000 to $70,000, with the payback period from two to seven years.

It saw opportunities for growth in the Australian market and expanding its product range to target millennials and motor vehicle borrowers.

It also believed its future growth profile may be augmented through targeted acquisitions.

The prospectus also included key risks, warning that Harmoney was an early stage company and as such was a speculative investment.

Its risks included the potential for higher than expected credit losses, and if its customers defaulted on loans that had been funded out of its warehouse facilities, it could suffer losses on the subordinated funding it provided to those facilities.

It also warned of risks from changes to regulations and the potential for action to be taken against it.

Technology failure and potential for a cyber attack were also warned about, and there was a specific Covid19 warning.

‘‘The full impact of the Covid19 pandemic is inherently uncertain and there is a risk that the economic and financial markets and business conditions could further weaken. This could result in borrower default on existing loans.’’

That could affect the the firm’s future financial performance and the price of values of its shares, it said.

No dividends are expected to be paid in the near term following the company’s listing on the ASX and foreign exempt listing on the NZX. — The New Zealand Herald