Elevate Credit pulls off lending IPO

By Katie Roof for Techcrunch

After postponing its IPO last year, Elevate Credit, the venture-backed lending company, went public on the New York Stock Exchange today.

Elevate priced at $6.50 per share, closing the day up over 19 percent at $7.76, but this was still well below the expected range of $12 to $14. They decided to go through with the offering to take advantage of an open “IPO window,” with a strong investor appetite for newly public tech companies.

“We started this IPO process a year ago in a really terrible market and it’s great to get it done,” said CEO Ken Rees. He was so excited to ring the opening bell that he “broke the gavel.”

It’s been an especially difficult environment for lending startups following Lending Club’s challenges and other industry regulatory concerns. But Rees said that he’s optimistic that any upcoming regulation surrounding payday loans would likely just “get rid of a lot of bad actors” and that Elevate would prevail because their standards are in line with the Consumer Finance Protection Bureau (CFTB).

Elevate facilitates loans for people with lower credit scores, a large potential market opportunity, but a very risky business. They have an algorithm that uses machine learning to assess a user’s online habits and determine whether it’s a customer they want to take a chance with.

“We are taking the risk because we know the quality of these customers and how they perform,” said Rees. Claiming they have “10,000 data points,” they take a look at financial indicators like bank accounts to determine cash flow, but also “electronic indicators” like whether users take the time to do their research before filling out the form on the Elevate website.

Rees touted their growing top line, which went from $434 million in revenue in 2015 to $580.4 million in 2016. Losses were $22.4 million last year, compared to $19.9 million the year before.

Elevate used to be part of Think Finance, or TFI, but was spun off in 2014.

Elevate’s performance on the stock market could be a bellwether for other lending startups. SoFi has been talking about an IPO for several years now.

Elevate follows Snap, MuleSoft and Alteryx, making it the fourth venture-backed tech IPO of the year. Okta, Yext and Cloudera are also expected to go public in the near future.