Ahead of the AltFi London Summit, Daniel Lanyon takes a look at what a spate of public listings could mean for the UK’s disruptive finance industry.
Have you noticed fintech is becoming increasingly embedded within the incumbent financial industry? Perhaps it’s just that bankers are now growing beards and opening offices in Shoreditch. Apparently, some even vote for Jeremy Corbyn. Or it could be that many of the UK’s leading fintechs are planning to ‘go public’ this year.
Stock market listings are a bit like buses; they all seem to come at once after a lengthy wait. They, also like buses, have the potential to soar off into the distance or quickly break down or get stuck in traffic.
Now City types are full of chatter about a wave of potential Initial Public Offerings (IPOs) among the UK’s legion of fast growing fintech firms. It is no secret investors will soon likely have a fleet of opportunities to invest in high growth firms once the preserve of Silicon Valley’s venture capital and private equity giants.
Funding Circle, one of the most notable UK ‘unicorns’ (a tech firm with a valuation north of £1bn), is the latest firm to make headlines for a soon-expected IPO. It also recently enlisted Goldman Sachs and Morgan Stanley to help with the process, according to media reports. Many other notable digital lending platforms such as Zopa and LendInvest as well as banking challengers such as Monzo have also dropped hints that they aspire to move into public spheres eventually, if not soon.
Fintech’s IPO flurry will therefore be one of the likely hot topics at the forthcoming AltFi London Summit on 26 March 18 (shameless plug, sorry) alongside Open Banking and the future profitability of the many fintechs more used to scaling up on piles of venture capital than delivering a regular stream of profits and dividends.
For the uninitiated fintech, short for financial technology, is ultimately concerned with ‘disrupting’ big banks and financial services more broadly. As an age-old financial centre London and the UK in general has managed to excel at this industry and current estimates put its workforce across the country at about 65,000 although this grows steadily week-by-week. Big banks are well and truly taking notice as are global tech behemoths such as Amazon and Google.
In Brexit Britain fintech gleams as a bright spot in the economy and a recent favourite plaything of politicians and policy makers looking to super charge the UK’s lagging productivity and economic growth. It leads Europe in terms of fintech investment and London is often touted as fintech’s spiritual global capital.
Entrepreneurs, fund managers, lawyers and legions of equity holders as well plenty of naysayers are looking on with keen interest and perhaps a bit of schadenfreude, from the latter category.
Naysayers might have a point though. While the UK has relatively little in the way of listed fintech firms the US saw several huge IPOs of marketplace lending platforms such as Lending Club and OnDeck. It’s fair to say these have not faired well for investors getting in at these two firm’s IPO. Both have seen their share prices plummet from their original listing prices only to stabilise between 70 and per cent below their short-lived highs.
“[The IPOs] lost touch with reality, so I imagine valuations will be rich but more sensible [for UK fintechs],” he said.
Another key concern for investors and another big theme of the AltFi London Summit is the how can fintechs turn their fast growing businesses into scalable profits and send their share prices higher.
This is especially true one of the UK fintech industry’s most popular areas; digital banking challengers such as Revolut, Monzo and Tandem. Our Making the Marketplace Roundtable will explore the financial services “app stores” being used for revenue generation.
Integrafin, a fintech aiming to help financial advisers, kicked of fintech’s Big IPO Year with its own stock market listing last month, followed by TruFin and a new listed fintech fund Augmentum Fintech just this week. All have so far faired well in markets although it still very much early days.
Adam Afriyie, the MP for Windsor and a successful entrepreneur in his own right, will open up proceedings at the event and most likely offer up a bullish outlook. He is the parliamentary chair on fintech after all. For the sake of fintech’s new investors, let’s hope this is right.