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Prospa: Conservative legal opinion or something more at play?

Prospa: Conservative legal opinion or something more at play?
06 Jun
2:56

There are two ways to view Prospa’s delayed listing. 

Either the company and its bankers and lawyers have reacted very conservatively to ASIC’s industry wide inquiry and a letter that arrived only hours before the company’s listing – which is Prospa’s view of what has happened – or there is something more at play. 

Either way, it ensures a pretty crucial 48 hours ahead for everyone involved at Prospa and the shareholders that took shares in its $146.5 million initial public offering. 

The Prospa view of the world is that the company and its bankers reacted to a conservative legal view that it would be better to delay the float by “approximately 48 hours” than list so soon after receiving the ASIC letter. 

Prospa said the questions from ASIC were “in relation to Prospa’s small business loan terms, in the context of an industry wide review into financial services small business loan terms”. 

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Questions like this from ASIC are hardly a new thing. Field Research analyst Stewart Oldfield told clients on Monday that “the corporate regulator last month wrote to the major players in the digital SME loan sector asking them to ensure that they are complying with newish unfair contract regulations for standard form contracts”.

Prospa offers $5000 to $250,000 loans on a three to 24-month amortising basis. The average loan size is $26,000. The effective annualised interest rate on its loans is 43 per cent, according to information sent to fund managers as part of the float marketing campaign. 

The key message Macquarie Capital and UBS’s equities desks will have for fund managers is that it’s part of an ASIC-wide review covering banks and non-banks, it’s a prudent step to delay the listing and Prospa is a key participant in fintech industry talks about how the market is evolving. 

But fund managers will still be scratching their heads. 

As one fundie that backed the float told Street Talk: “It’s hard to see how this can be a good thing”. 

It is not every day – or even every month or every year – a float of this size and coming out of the global investment banks announces it is delayed 15 minutes before it is due to list. 

Add the fact that it is a big player in fintech, and in a wider financial services industry that is very much in the spotlight of regulators, and it’s easy to forgive investors for being nervous. 

Macquarie and UBS are Prospa’s joint lead managers, while Herbert Smith Freehills is doing the legal work. 

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