Fintech Investors Balk at Funding Circle's Optimistic IPO Hopes

(Bloomberg) -- European fintech entrepreneurs may have become too optimistic about the rewards from taking their companies public.

Funding Circle Holdings Plc was little changed in its first day of trading Friday after pricing its initial public offering at the bottom end of its price range. The eight-year-old British online loan provider’s IPO valued the company at 1.5 billion pounds ($2 billion), compared with an initial aspiration of as much as 2 billion pounds.

The shares barely got an opening-day pop from their 440-pence IPO price, with an initial gain of almost 5 percent erased after the first half-hour of trading. The stock was up 0.4 percent to 441.7 pence at 10:45 a.m. in London.

Enthusiasm for the sector’s prospects reached a peak this summer, when Dutch payment processor Adyen NV more than doubled in its first day of trading and went on to triple in value. Unlike Adyen, though, Funding Circle is unprofitable, plowing its rapid revenue growth into equally rapid expansion.

Funding Circle raised 300 million pounds by selling new stock in the IPO, which is backed by Anders Holch Povlsen, a Danish retail billionaire. The London-based firm, formed in 2010 by three friends from Oxford University, was initially a peer-to-peer lender that matched individual retail investors with small companies. It has since turned to other sources of funding, like big insurers and government agencies seeking to get more credit into the economy.

The initial range for the IPO was 420 pence to 530 pence, which would have raised a maximum of 1.8 billion pounds. The range was subsequently narrowed to between 440 pence and 460 pence.

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