Despite setting its flotation price at the lower end of its indicated range, at 440p, the fintech firm’s shares had fallen to 364p in conditional trading by last night.
This morning saw the shares slide a further 15.6p to 348.4p as official dealing started, giving the peer-to-peer (P2P) lender a market capitalisation of around £1.2bn, which is still not bad for a company that has never made a profit.
Market commentators have suggested that the new listings market has been getting a reality check, with luxury cars producer Aston Martin also having to pitch its initial public offering this week at the lower end of the indicated range.
$ASTON It's not exactly roared away from the starting grid but at least Aston Martin has not shifted into reverse in conditional trading. https://t.co/zhium75I7u via @proactive_uk #ASTON #brighterir #AndrewScottTV #CapitalNetwork1— John Harrington (@JournoJohnH) October 3, 2018
“Many IPOs have been a great success this year and you cannot conclude from Aston Martin and Funding Circle’s problems that investors have suddenly gone off new floats. You need to look at them on a case-by-case basis,” suggested Russ Mould, the investment director at AJ Bell.
“Peer-to-peer platform Funding Circle lost nearly 20% of its value while still in the conditional trading phase, sometimes described as a grey market, yesterday.
“This is highly unusual, as typically the banks which bring a company to market are able to at least stabilise a share price during this period. It is also worth noting the issue had already come in at the bottom of the guided range at 440p,” he added.
“Funding Circle made £94.5mln revenue in 2017 and a pre-tax loss of £36.3mln. It spent £38.7mln on marketing – so roughly 40% of revenue. The company says it expects to significantly increase marketing activity, albeit maintaining this ratio of spend-to-revenue for the medium term.
“You also have to consider the P2P sector has developed a patchy reputation in recent years with concerns about loan default levels and lower returns than some platforms initially indicated,” Mould observed.