Prospa's IPO is out, and two top VC firms have tipped in more money ahead of the $146 million float

SuppliedProspa’s Greg Moshal and Beau Bertoli.
  • Prospa, founded in 2012, lends between $5000 and $250,000 to Australian small businesses, with $200 million in loans currently on the books.
  • The company has been backed by venture capital firms Airtree and SquarePeg, who’ve increased their investments ahead of the float.
  • The company will list on June 6 with a market cap of $576 million.

Small business lender Prospa is planning to raise $146.5 million in a float on the ASX on June 6.

The raise is offering 17.5% stake the business from new shares priced at $3.64 per share, giving the business a total value of $576 million.

Existing venture capital investors Airtree and SquarePeg have tipped in additional funds to increase their stakes in the the six-year-old business, while London-based Entrée Capital will support the IPO to maintain its 34% stake in the company.

Airtree has has invested an additional $3 million for 8.4% of Prospa, while SquarePeg put another $10 million in to increase its holding from 3.2% to 4.4%.

Prospa says the 60% of the $100m primary raise will be used to fund the equity portion of the loan book, with 40 used to fund investment in new products and a move into New Zealand, as well as for working capital.

The remaining $46.5 million will allow existing shareholders an opportunity to realise part of their investment.

Co-founded by Greg Moshal and Beau Bertoli in 2012, Prospa has written $500 million in loans between $5000 and $250,000 and currently has $200 million in loans on its books.

At IPO Moshal will have a 15.5% stake in Prospa, worth nearly $90 million and Bertoli 6.1%, valued at around $35 million.

Here is the breakdown of the company’s ownership following the IPO.

Prospa IPO prospectusProspa IPO prospectus

The lender says “small businesses are under-served by banks” and the IPO announcement comes on the day the financial services royal commission begins two weeks of hearings into loans to small and medium enterprises by banks.

Prospa now claims to be Australia’s leading online small business lender, with loan originations and revenue forecast to grow at 34% and 44%, respectively, over CY18.

The Sydney-based business promises “fast, flexible loan solutions”, generally within a day, using proprietary software to assess the financial viability and risk factors in a business.

“We also designed our technology platform and workflow to be scalable, flexible and support our growth strategies,” chairman Greg Ruddock said in his letter accompanying the Prospectus.

“The team has built a profitable, fast growing business in Australia with loan originations and revenue growing at a compounded annual growth rate (“CAGR”) of 127% and 130%, respectively, for the period between FY15 and FY17.”

Prospa’s net revenue almost doubled between FY16 and FY17, from $23.1 million to $53 million. It is forecasting $96.7 million net revenue in FY18.

EBITA has moved from negative $7.3 million to a wafer-thin EBITDA loss of $1 million in FY17, to a positive EBITDA of $6.4 million in FY18.

The prospectus revealed that Prospa has strong repeat business from its customers, with “approximately 69% of eligible customers taking a repeat loan”, and that “monthly customer cohort trends indicate that each new customer on average takes 2.5 loans over their estimated customer lifetime. Furthermore, we expect our average loans per customer will increase as our loan book continues to season and customers take on repeat loans with us.”

Co-founder Beau Bertoli said the data driving the business will ensure it manages risk as it grows.

“We started Prospa in 2012 because it was clear to us there had to be a better way. As first mover in a nascent market, Prospa has led the way in enabling small businesses to succeed,” he said.

Listed life marks another milestone in our growth, however our approach to business won’t change. We are relentlessly looking for a better way to operate, continuously innovating our products and business model and using data to make great decisions and better manage risk.”

His partner Greg Moshal said the business focuses on “obsessing about our customers and finding new ways to improve their chance of success by designing outstanding new customer solutions”.

The IPO includes an Institutional Offer in Australia, plus a retail offer via Australian retail clients and sophisticated New Zealand retail clients of Macquarie Equities, Crestone and JBWere, as well as an employee offer capped at $1 million in total and priority offer to investors selected by the company, capped at $7.6 million. No general public offer of is being made.

Following the float, Airtree and SquarePeg will be escrowed to the end of the forecast period, with the stakes belonging to Entrée Capital, Prospa’s Co-Founders Greg Moshal and Beau Bertoli, Chairman Greg Ruddock and Non-Executive Director, Avi Eyal (co-founder and Managing Partner of Entrée Capital) will be escrowed until the release of Prospa’s FY19 full year audited results.

Based on the float price, Entree Capital’s stake in Prospa is worth around $196 million.

The deal is fully underwritten by Joint Lead Managers Macquarie Capital (Australia) Limited and UBS AG, Australia Branch.

The chart below shows the growth in Prospa’s staffing numbers. It had 134 staff in 2017 and expects that to lift to 193 this calendar year.

Prospa IPO prospectus

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