Small business lender Prospa is to further delay its float on the Australian Securities Exchange as the company seeks to “clarify queries” raised by ASIC.
Prospa was scheduled to start trading on the Australian Securities Exchange (ASX) at midday on Wednesday (6 June), with a market capitalisation of $576 million after raising $146.5 million through its initial public offering.
However, minutes before listing, the lender revealed in a disclosure to the ASX that there would be a 48-hour delay so that it could “clarify queries raised by ASIC [on Tuesday] in relation to Prospa’s small business loan terms”.
The lender further noted that these questions were “in the context of an industry-wide review” into unfair small business loan terms.
However, a spokesperson from the financial services regulator noted that while ASIC had been in contact with Prospa in recent days, along with other lenders, there was no pressure on the regulator’s part for Prospa to defer the listing on short notice.
It has now been revealed that, following a board meeting last night (7 June) and consultation with UBS and Macquarie, the float is to be postponed further.
A statement issued by Propsa reads: "Over the past 48 hours, Prospa has constructively engaged with ASIC to review its current loan terms and has provided detailed information in response to the regulator’s queries.
"Prospa is satisfied that the issues discussed with ASIC are not material to the IPO and no additional disclosure is required in the prospectus. ASIC has not raised further queries on the prospectus."
The lender added that the company continues to perform strongly and May 2018’s originations were 23 per cent ahead of the prospectus forecast.
"The company has the complete support of its Board and existing shareholders," the statement continues.
"Major shareholders, including Entrée Capital, Square Peg Capital, and AirTree Venture Capital committed over $47m to the IPO (equivalent to almost half of the new funds coming into the company) and continue to be fully supportive of the company."
Ombudsman calls for greater clarity on fintech loan terms
The news comes amid renewed calls for fintechs to make their loan terms explicitly clear to customers.
Speaking to The Adviser’s sister title, Mortgage Business, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, stated her concern that fintechs, including Prospa, are making their interest rates “really hard to understand”.
“The problem is that, currently, the fintech industry — and Prospa, for that matter — don’t like quoting [annual percentage rates]. They want to quote factor rates. [Many] people don’t understand what a factor rate is,” Ms Carnell said.
She continued: “The dilemma with the current way that Prospa and others reflect the cost of loans is not transparent. If people want to pay high interest rates, that’s absolutely their call as long as it’s really clear what the cost of the loan is.”
According to the ASBFEO, there needs to be greater transparency (among all fintech lenders) around establishment fees and direct transfer fees.
“The sort of loans that are given here are loans that are paid back daily… which means there’s a direct transfer fee every day. It might be a couple of bucks, but [it’s] every day, so that adds to the cost of a loan,” Ms Carnell said.
“I’m not suggesting that the way the loans are structured is a bad way to structure them. I’m just saying that the transparency of the cost needs some work.”
Ms Carnell told Mortgage Business earlier this week that if Prospa’s prospectus did not adequately reflect how its contracts are compliant with the amended consumer law, then delaying the listing makes sense, as it’s legally important that the document is accurate prior to being admitted to the ASX.
“Prospa has said in the prospectus and other places that they have looked at their contracts. They didn’t go on to say, ‘And we believe the contracts are totally compliant’,” the ASBFEO said.
“There [are] pretty strong laws around prospectuses being reflective of the current situation and also potential future situations.”
[Related: Prospa prepares to float]
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