This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.bbc.co.uk/news/business-45734054
The article has changed 5 times. There is an RSS feed of changes available.
Version 2 | Version 3 |
---|---|
Shares flop in peer-to-peer lender Funding Circle | |
(about 1 hour later) | |
Shares in Funding Circle, the peer-to-peer lender, have tumbled in the first day of full trading on the London Stock Exchange. | |
They fell as much as 24% from the float price of 440p before recovering slightly to trade at about 364p. | They fell as much as 24% from the float price of 440p before recovering slightly to trade at about 364p. |
Analysts say the flotation may have overpriced the firm. | Analysts say the flotation may have overpriced the firm. |
Funding Circle draws on a pool of funds collected from individuals and firms, which is then lent to small businesses vetted by the company. | Funding Circle draws on a pool of funds collected from individuals and firms, which is then lent to small businesses vetted by the company. |
Because it cuts out banks, Funding Circle was billed as a disruptive force in lending. | Because it cuts out banks, Funding Circle was billed as a disruptive force in lending. |
It is the number one peer-to-peer lender to small businesses in the UK, the US, Germany and the Netherlands. | |
Since it was set up in August 2010, Funding Circle has lent more than £5bn to 50,000 small businesses from 80,000 investors - including some £1bn in the first half of this year. | |
High price | High price |
Helal Miah, an investment research analyst at the Share Centre, said shares have fallen because the initial valuation of £1.5bn was too high. | |
He also pointed out that marketing spending is equal to 40% of revenues - a high ratio. | He also pointed out that marketing spending is equal to 40% of revenues - a high ratio. |
That, coupled with sparse financial data about the firm, would be enough to make investors wary, Mr Miah added. | |
Funding Circle is the first such lender to float on the London stock market. | Funding Circle is the first such lender to float on the London stock market. |
It said the stock market listing would help "engender trust" with investors, borrowers and regulators. | It said the stock market listing would help "engender trust" with investors, borrowers and regulators. |
The venture plans to use the money raised on the stock market to expand into new markets. | |
Financial crisis | |
Funding Circle was founded in the aftermath of the financial crisis, when trust in traditional banks was in the doldrums. | |
It enabled small and medium-sized companies to borrow from ordinary investors and other firms, rather than the traditional banks. | |
It has been billed as one of a new crop of financial technology companies, that might prove to be a real threat to the traditional banking industry. | |
Funding Circle chief executive Samir Desai has previously said his company might not have existed were it not for the crisis: "Before 2008, small businesses didn't necessarily like their bank but they trusted them. After the crisis even that wasn't true." |