OnDeck has priced its initial public offering of 10 million shares at $20 per share.
At this price OnDeck should raise $200 million in the IPO and this would give the firm a valuation of $1.3 billion. The $20 price per share is above the range of $16 to $18 a share that OnDeck previously announced. In addition to the 10 million shares, the underwriters have a 30 day option to purchase up to an additional 1.5 million shares to cover over-allotments. The shares are expected to start trading today.
OnDeck is an alternative lender, but not a peer-to-peer lender. It provides loans to small businesses in the range of $5000 to $250,000 with terms of 3 months to 24 months. The firm gets its capital from credit lines provided by banks and it sells securitizations of some of the loans that it makes, as well as offering whole loans to investors via its website. It looks at a wide variety of factors when lending to a business, including things like a businesses’ social media rating. Since its inception in 2007, OnDeck has originated more than $1.7 billion in loans
Thane Bublitz, senior equity research analyst at Thrivent Financial, commented:
“That Lending Club’s IPO was well received is a positive for OnDeck.”
“They’re a relatively new company, and while they have a proprietary underwriting systems whose underwriting results have been good so far, if we go into another recession the credit quality metrics will have to be closely. They’re going to be very sensitive to the credit cycle.”
As Bublitz says, OnDeck is following the highly successful Lending Club IPO. Shares in Lending Club surged 56% from their IPO price on the first day of trading and has since traded up to $25.64 from its initial price of $15 per share. The Lending Club float proved that there is wild demand for a piece of this sector and we will see whether this remains true for OnDeck.