US-headquartered online lending marketplace Upstart Holdings floated yesterday in a $240m initial public offering on the Nasdaq Global Select Market in which internet and technology group Alphabet sold shares.
The offering consisted of 9 million shares issued by Upstart and just over 3 million sold by its shareholders. They were priced at the foot of the IPO’s $20 to $22 range and opened at $26.00 yesterday, closing at $29.47 to give the company a market capitalisation of over $2.14bn.
Upstart has built an online lending platform that uses artificial intelligence to assess the creditworthiness of borrowers and matches them with its banking partners. About 70% of its loans are fully automated, and it has overseen more than 620,000 loans altogether.
The company made a $5m net profit in the first nine months of this year having boosted its revenue 45% year on year to approximately $147m at the same time. It had raised more than $160m in funding pre-IPO.
GV, the Alphabet subsidiary then known as Google Ventures, took part in Upstart’s $1.75m seed round in 2012 alongside First Round, Kleiner Perkins Caufield & Byers, New Enterprise Associates, Tuesday Capital (then CrunchFund) and Mark Cuban.
Khosla Ventures, First Round and Collaborative Fund joined Founders Fund, Eric Schmidt, Marc Benioff and Scott Banister in a $5.9m round in 2013 before returning for a $35m series C with Third Point Ventures two years later.
E-commerce firm Rakuten co-led the company’s $32.5m series D round in 2017 through its Fintech Fund with an undisclosed asset manager, investing together with Third Point Ventures, Khosla Ventures and First Round.
Upstart added $50m in April 2019, from Progressive Investment Company, the corporate venturing vehicle for insurance firm Progressive, in addition to financial services firm First National Bank of Omaha and pension manager Healthcare of Ontario Pension Plan.
GV sold about $1.6m of shares in the offering, equating to 9% of its stake, which now makes up 1.1% of Upstart’s overall shareholding. Rakuten did not sell shares but its stake was diluted from 5.3% to 4.6%.
Third Point Ventures remains the company’s largest investor, its 19.3% stake cut to 16.8% in the IPO. Stone Ridge Trust sold $11.4m of shares and will come out with a 5.1% stake while First Round divested $6.1m of shares and now has a 4% stake. Khosla Ventures’ stake was diluted from 8.3% to 7.2%.
Goldman Sachs, BofA Securities and Citigroup are lead book-running managers for the IPO. Jefferies and Barclays are also book-running managers while JMP Securities and Blaylock Van are co-managers.
The underwriters will likely take up the over-allotment option and acquire up to 1.8 million more shares to increase the size of the offering to $276m.
