Elevate Credit, the lending startup that last year delayed its initial public offering, went public late last week, beginning trading on the New York Stock Exchange.
According to a report in TechCrunch, the IPO priced at $6.50 a share and finished its first day of trading at $7.76, up 19 percent. The shares were expected to trade between $12 to $14 a share but failed to move that high. Elevate opted to go through with the IPO to take advantage of a so-called IPO window, where there was strong interest in startup tech companies.
“We started this IPO process a year ago in a really terrible market, and it’s great to get it done,” said CEO Ken Rees in the report.
Despite the tough lending environment for startups in the lending market thanks to problems at Lending Club, the CEO of Elevate Credit told TechCrunch he is optimistic that any regulation that comes focused on payday loans will get rid of “a lot of the bad actors” and would help Elevate because they have standards that are in line with the Consumer Finance Protection Bureau. Elevate does operate in a risky market since it provides loans to people with less-than-stellar credit scores. While that market presents a big opportunity to Elevate, there is also an increased risk of defaults.
Elevate relies on algorithms that use machine learning to assess the online habits of a borrower and determine if their customer is likely to pay back their loans.
“We are taking the risk because we know the quality of these customers and how they perform,” said Rees in the report, noting the company has 10,000 data points. The executive also pointed to its financials in the interview, saying its top line went to $580.4 million in 2016 from $434 million in 2015. Losses were higher in 2016, coming in at $22.4 million compared to $19.9 million in 2015.