Fifth Third Bancorp : Fintech Startup Moves Toward Listing -- WSJ
GreenSky could raise $1 billion in an online lending sector that has seen few listings
By Peter Rudegeair and Maureen Farrell
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 3, 2018).
Financial-technology firm GreenSky LLC has confidentially filed paperwork with the Securities and Exchange Commission for a sizable initial public offering that could come as soon as this summer, according to people familiar with the matter.
The Atlanta company, which operates a lending platform that enables retailers, health-care providers and home contractors to offer loans to their customers, could seek to raise $1 billion at a valuation of roughly $5 billion, some of the people said.
An IPO of GreenSky, backed by a number of Wall Street heavyweights, would end the drought in IPOs of financial-technology companies.
There is no guarantee GreenSky will proceed with an IPO. It may do another private share sale instead of a listing, some the people said.
Despite the large amount of financing that private investors have poured into lending startups, IPOs have been rare in recent years due in part to concerns around rising defaults among their borrowers and increased competition.
And those that have tapped the public markets have struggled. Shares in online lenders LendingClub Corp. and On Deck Capital Inc. were recently down 86% and 77%, respectively, from their IPO prices when they debuted in December 2014.
If GreenSky manages to raise $1 billion in a debut, it would be in rare company. Since 2015, just six U.S.-listed technology companies have raised that much or more, according to data provider Dealogic.
Last year, GreenSky was in talks to go public through an acquisition by CF Corp., a "black-check" company run by former Blackstone Group LP partner Chinh Chu, but the talks ultimately fizzled, according to a person familiar with the matter.
Companies now have the option to file an initial draft of their IPO prospectus with regulators and make adjustments before unveiling it publicly.
While Wall Street investors have been wary of LendingClub and On Deck Capital, GreenSky's business model has clear distinctions. Unlike those companies, GreenSky doesn't make loans directly. It arranges financing of up to $55,000 for customers of home-improvement retailers such as Home Depot Inc. and over 16,000 other merchants and service providers. A network of banks, including Fifth Third Bancorp, SunTrust Banks Inc. and Regions Financial Corp., fund the loans and hold them on their balance sheets.
As a private company, GreenSky doesn't release financial metrics but Moody's Investors Service said in a recent report that the company's projected annual revenue was over $400 million and expected to increase by more than 20% in the next year. GreenSky is on track to generate more than $200 million in earnings before interest, taxes, depreciation and amortization in 2018, people familiar with the matter said.
In late 2017, GreenSky raised $200 million from Pacific Investment Management Co. in a deal that valued the company at nearly $4.5 billion, The Wall Street Journal previously reported. Earlier investors in GreenSky include Fifth Third, asset managers TPG and Wellington Management Co. and venture-capital firms DST Global and QED Partners.
A successful IPO of GreenSky could encourage a host of fintech companies that have been weighing public offerings to move forward.
U.K.-based online lender Funding Circle Ltd. is considering an IPO this year on the London Stock Exchange, and Dutch payments company Adyen BV is weighing a listing this year on the New York Stock Exchange.