The institutional money will result in an estimated 94% increase in the platform’s lending capital – bringing the grand total to €61.8 million. That’s great news for Trustbuddy’s borrowers in Denmark, Finland, Sweden, Poland and Spain. The platform was the recipient of a €12.3 million cash injection towards the end of 2013 – which increased loan volumes on the platform by 43% quarter-on-quarter. This latest wave of capital is expected to effect a similar growth in loans. Lending capital, or a lack thereof, has been the primary constraint on volumes for Trustbuddy up to now – but there is robust demand on the borrower side.
The news comes off the back of the launch of Trustbuddy’s new platform last month – featuring enhanced automation, capacity and credit scoring. Trustbuddy has also announced plans to launch its first long-term product. Traditionally focused on short-term, small-scale lending, the Swedish platform will now branch out to provide loans of up to 5 years for amounts up to €38,000. The maximum loan size at present is just €600. The new product is likely to attract a wider breadth of both borrowers and lenders.
The UK-based investment bank Liberum has provided an estimated valuation of Trustbuddy:
“Using a DCF approach we estimate a fair value market cap of SEK2.9bn equivalent to SEK8.00 per share – implying over 260% upside.
The commitment of institutional capital reduces revenue uncertainty and also signals a positive conclusion to the associated legal and operational due diligence undertaken. Post announcement, we would therefore expect Trustbuddy’s implied cost of equity to decline. Currently we estimate the market is applying a 30% cost of equity to TBDY – which seems high in our view relative to the peer group.
Lending Club is reportedly planning a 2H14 IPO at a valuation of $5.0bn equivalent to 41.5x trailing annual revenues. Trustbuddy currently trades on 13.2x trailing revenues a 68% discount. At the same trailing revenue multiple as Lending Club, Trustbuddy’s fair value per share would be SEK 7.1.”
It’s intriguing to see the impending Lending Club IPO already impacting the actions of fellow peer-to-peer operators. It will doubtless serve as a comparative for countless future p2p valuations.