COO of OnDeck Capital on aggregators, small business, and going public
The successful debut of Lending Club appears to have rubbed off on another alternative lender looking to trade on the public markets.
OnDeck Capital, which makes loans to small businesses, raised about $200 million from its initial public offering Tuesday night, valuing the firm at about $1.3 billion. (And if investor demand proves strong, OnDeck’s underwriters can buy up to an additional 1.5 million shares from the company to resell through what’s known as a “greenshoe” option, potentially pushing the total proceeds up to $230 million.)
The stock sale priced OnDeck’s shares at $20 each, surpassing a forecasted range of $16 to $18.
That warm welcome continues Wall Street investors’ embrace of companies that marry technology with the much older business of lending money. Lending Club has become a model for the alternative lending industry through the success of its so-called peer-to-peer system, which uses sophisticated computer algorithms to match up would-be borrowers with investors.
That approach has won over some major financial investors.
On Lending Club’s board are people like Lawrence H. Summers, the former Treasury secretary; John J. Mack, the former chief executive of Morgan Stanley; and Mary Meeker, the technology analyst who is now a venture capitalist.
James D. Robinson III, the onetime chief executive of American Express, is an OnDeck director.
Such was the fervor among investors for Lending Club’s I.P.O.
that the company priced its stock sale above an already heightened price range. On Tuesday, the lender announced that its underwriters had exercised their greenshoe option, pushing the offering’s total proceeds to $1 billion.
OnDeck, which was founded in 2006, uses a different approach.
While small businesses apply for loans online, the firm primarily draws its capital not from assembled pools of lenders but from credit lines provided by banks and by selling off pieces of loans that are made through its platform through a process known as securitization.
Still, investors can also buy entire loans through a special marketplace run by the company.
OnDeck is expected to begin trading on the New York Stock Market on Wednesday, under the ticker symbol ONDK.
Its offering was led by Morgan Stanley, Bank of AmericaMerrill Lynch, JPMorgan Chase, Deutsche Bank and Jefferies.