P2P plat­form Fund­ing Cir­cle pre­pares to float

Up­com­ing IPO will hope to do bet­ter than their US coun­ter­parts

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Peer-to-peer lender Fund­ing Cir­cle in­tends to list on the London Stock Ex­change. It is hop­ing to raise £300m as it tar­gets a £1.7bn val­u­a­tion, but how safe are these plat­forms as in­vest­ments?

Neil Faulkner, manag­ing di­rec­tor of peer-to-peer lender 4thWay, notes some fund man­agers have al­ready got burned from in­vest­ing in these type of com­pa­nies. One fund man­ager says he stays away from these as­sets as they are hit quickly at the first hint of weak­ness in the econ­omy.

A glance across the pond to pre­vi­ous IPOs in this space should sound a cau­tion­ary tone. Both Lend­ingClub and On Deck are both now trad­ing well be­low their IPO prices and there are al­ready some warn­ing signs with Fund­ing Cir­cle.

Free cash flow is neg­a­tive £24.2m al­though this re­flects the fact the com­pany is plough­ing lots of cash into mar­ket­ing. Also given the com­pany’s rev­enue for 2017 was al­most £100m, the mar­ket cap sug­gests a mul­ti­ple of 17-times trail­ing rev­enue which is high and as­sumes great growth.

As Faulkner, says rather omi­nously, ‘most peer-to-peer lend­ing plat­forms them­selves have not yet been tested in a down­turn’.

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