Britain’s biggest peer-to-peer lender is lining up one of Wall Street’s top investment banks to spearhead a London flotation expected to value it at £1.5bn.
Sky News has learnt that Funding Circle is expected to appoint Morgan Stanley in the coming weeks to prepare it for one of the biggest stock market listings launched by a UK fintech start-up.
City sources said that Morgan Stanley had been co-ordinating a series of meetings between Funding Circle’s management and institutional investors in recent weeks.
While a formal beauty parade of investment banks will not take place until next month, insiders said the Wall Street firm was certain to win a prominent role on the float.
An initial public offering (IPO) of Funding Circle, is anticipated during the second half of the year, when the company will seek to raise hundreds of millions of pounds from the sale of new shares.
Funding Circle, which launched in 2010, has matched lenders to tens of thousands of small business borrowers, facilitating loans totalling more than $5bn globally during its seven-year existence.
Its rapid growth has earned it the status of one of the UK’s few fintech “unicorns” – companies which have achieved a prized $1bn price-tag.
Some existing investors believe the float will value Funding Circle at well over £1.5bn – far in excess of the $1bn valuation it hit when it raised £82m in January 2017 from investors led by Accel, the blue-chip tech company backer.
Funding Circle’s other big shareholders include funds such as Baillie Gifford, the Edinburgh-based manager, DST Global, Index Ventures and Rocket Internet.
Temasek Holdings, the Singaporean state-owned vehicle, is also an investor.
Funding Circle was set up by Samir Desai, Sam Hodges and James Meekings.
They identified opportunities offered by new technology to provide access to finance for businesses frozen out by mainstream banks, while also promising superior returns to investors.
The P2P sector, as it has become known, has seen an explosion in the number of providers and the range of products, with the likes of Funding Circle launching so-called Innovative Finance ISAs.
The company has also struck partnerships with Royal Bank of Scotland and Santander UK.
Peer-to-peer lending has come under growing scrutiny as the asset class has expanded, with rivals including Ratesetter recently following Funding Circle by gaining full authorisation from the Financial Conduct Authority.
However, some prominent City figures, including Lord Turner, the former FCA chairman, have raised concerns about the industry’s lending standards.
He subsequently moderated his warning, acknowledging that peer-to-peer lending was “likely to become a stable, significant and useful part of our total credit supply system”.
If an initial public offering is successfully completed, it will value the stakes of the three Funding Circle founders in the tens, and probably hundreds, of millions of pounds.
It would also be likely to crystallise a more modest windfall for Eric Daniels, the former chief executive of Lloyds Banking Group, who sits on the company’s board as a non-executive director.
Funding Circle is chaired by Andrew Learoyd, a former Goldman Sachs banker, who has been involved with the company since its launch.
Funding Circle already has a presence on the stock market, having listed an SME income fund on the London Stock Exchange in 2015.
A successful float of the wider group, which would emulate that of rival Lending Club in the US in 2014, would spark a race among UK competitors to go public.
Other fintech unicorns such as TransferWise are also targeting floats over the next two years.
Funding Circle and Morgan Stanley declined to comment on Friday.