The first scheduled initial public offering (IPO) did not make it out the door last week, and the company is expected to try again this week. A second IPO is also on the calendar, but it faces its own hurdles.
In 2015 a total of 170 companies launched into the public markets according to IPO ETF manager Renaissance Capital, and those companies raised a total of $30 billion. Of the total, 78 newly public companies came from the healthcare sector. In 2014, 275 companies came public and raised $85.3 billion. Renaissance Capital does not include “best efforts” or blank-check companies in its totals.
Last week’s postponed IPO was Shimmick Construction Company Inc., a heavy civil construction company offering services to federal, state, and local public agencies and private customers in California and the Western United States. The company plans to offer 6.25 million shares in an expected price range of $11 to $13. Approximately half the shares are being sold by existing stakeholders, so the company’s proceeds at the midpoint of the range would be about $44.8 million at an implied market cap of $181.5 million. Sole bookrunner for the offering is FBR Capital Markets and co-managers are BB&T Capital Markets and D.A. Davidson. Pricing and the start of trading are given as day-to-day. The stock will trade on the Nasdaq under the ticker symbol SCCI.
Elevate Credit Inc. is an online credit company for non-prime borrowers in the U.S. and the U.K. that uses technology and advanced analytics to make lending decisions. The company plans to offer 3.6 million shares in an expected price range of $20 to $22, raising $75.6 million at an implied valuation of $638.4 million. Joint bookrunners for the offering are UBS Investment Bank, Jefferies, Stifel, and William Blair. Co-manager is BB&T Capital Markets. Shares are expected to price Thursday and begin trading Friday on the New York Stock Exchange under the ticker symbol ELVT.
What’s interesting about Elevate, besides the fact that it could be the year’s first venture capital-backed IPO, is that it has been characterized as a payday lender that charges borrowers much higher interest rates than those available on other types of loans. MarketWatch noted:
But those automated approvals and the high interest rates that follow come with a slew of regulatory issues and questionable tactics. Despite the focus on its technology, Elevate appears to be nothing more than an online version of an industry that preys on the poor with loans they can’t obtain from banks, at interest rates banks could never charge.
In its Form S-1A filed on January 11th, Elevate said it offers installment loans under the brand name ‘Rise’ in 15 states. Loan amounts vary from $500 to $5,000 and repayment terms vary between 4 and 26 months with annualized interest from 36% to 365%. The weighted average annual percentage rate (APR) is 176%.
The installment loan program in the U.K. is branded ‘Sunny’ and offers loans ranging in amount from £100 to £2,500 for periods of 6 to 14 months. Monthly interest rates vary from 10.5% to 24% and the weighted average APR is 255%.
The company also offers a line of credit called ‘Elastic’ in 40 U.S. states with amounts varying between $500 and $3,500. The loan term is up to 10 months and borrowing costs are initially $5 per $100 borrowed plus up to 5% of outstanding principal per billing period. The company has calculated an APR for these loans at 88%.
In a letter included with the Form S-1/A, Elevate’s CEO said:
[W]e utilize risk-based pricing to achieve target margins with simple and transparent pricing. This means that our customers will pay the rate appropriate for their risk but won’t face hidden or punitive fees, and as a result, most of the credit we offer will be priced above rates generally available to prime consumers. Our goal is to balance the need to provide access to responsible credit with the need for sustainable profits.
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