September 10, 2018 / 7:24 AM / 12 days ago

UPDATE 3-Funding Circle plans October listing in British 'fintech' first

* First British peer-to-peer lender to go public

* IPO to include new, existing shares

* Backed by billionaire Povlsen, open to retail

* Listing expected in October (Updates with 2017 earnings, paragraph 10)

By Simon Jessop and Emma Rumney

LONDON, Sept 10 (Reuters) - Funding Circle (IPO-FNIG.L) will test investor demand for British peer-to-peer lenders in a listing scheduled for October and expected to value it at more than 1.5 billion pounds ($1.94 billion).

As the first of Britain’s new breed of financial technology firms to IPO, the company backed by Danish billionaire Anders Holch Povlsen and launched in 2010 hopes to raise around 300 million pounds from the listing on the London Stock Exchange.

Some in the financial industry are concerned about whether upstart peer-to-peer lenders challenging established banks will be able to weather an economic downturn and similar platforms in the United States have seen their shares tank after hitting problems.

Funding Circle said on Monday that now was the right time to IPO to demonstrate its maturity, transparency and governance to both investors and borrowers. The listing will include new and existing shares and be open to retail investors, it added.

It said it will use the proceeds to strengthen its balance sheet in order to take advantage of opportunities in existing or new geographies, including by spending on marketing in order to grow brand awareness.

Povlsen, an investor in companies such as ASOS and Zalando, has agreed to take a stake of up to 10 percent up to a maximum valuation of 1.65 billion pounds, via his holding company Heartland A/S.

CRACKDOWN

Peer-to-peer lenders work by matching borrowers with retail and institutional investors willing to lend for a return, with Funding Circle focusing on small and medium-sized businesses.

Capitalising on high-street banks’ retreat from lending to that sector since the financial crisis, it has facilitated more than 5 billion pounds in loans to more than 50,000 companies in Britain, the United States, Germany and the Netherlands.

Competing with rivals like RateSetter and Zopa, Funding Circle has enjoyed quick growth and status as one of Britain’s most promising fintech ‘unicorns’ - start-ups whose valuation has risen above $1 billion.

The company has not yet turned a profit, however. It lost 35.3 million pounds in the year to December 2017, according to its IPO registration document, and lost 46.6 million pounds the year before.

The sector also faces a crackdown from the Financial Conduct Authority, which plans to tighten rules after poor practices by some firms.

RateSetter left the industry’s trade body after revealing it had bailed out bad loans without disclosing this to investors, while in the United States the founder and former chief executive of listed peer-to-peer lender LendingClub Corp borrowed from the company to inflate its loan volumes.

$1 = 0.7726 pounds Reporting by Simon Jessop and Emma Rumney; editing by Alexander Smith and Jason Neely

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