The saying ‘third time’s a charm’ rings true for financial services company Latitude (ASX: LFS) who finally made their entrance to the public market last week after cementing themselves as the biggest ASX float of 2021
This year’s offering marked Latitude’s third attempt at an IPO. Their first attempt was stalled in 2018 by investor sentiment around the Royal Commission into Banking and was followed by their second attempt in 2019 which attracted minimal broker interest.
This time around, Latitude opted for their smallest offering which proved more attractive to investors, successfully raising just $150 million at a $2.60 Offer Price. It equated to a $2.6 billion float, a figure notably smaller than the $3.5 billion attempted-float in 2019 and even smaller than the $8.2 billion paid by GE Capital for the business in 2015.
Latitude is Australia’s third largest unsecured consumer lender, providing services to over 2.8 million customers and 3,400 merchant partners. Latitude’s business-to-consumer model came about in 2015 through the rebranding of GE Capital Finance, the largest retail finance company at the time.
Latitude prides itself on being more selective than its BNPL competitors, apparently rejecting two thirds of its potential customers of the 1 million that applied in 2020.
Afterpay on the other hand has reported a significant increase in customers over the last year, and is readying itself for US expansion.
Latitude’s view on installments as credit is what sets them apart. CEO Ahmed Fahour says that Latitude is “helping consumers with budgeting, there’s no question about it. We’re helping merchants with their marketing, no question about that as well. But it is credit at the end of the day, and an appropriate level of credit assessment or verification is required.” Latitude claims to conduct credit checks and service higher quality customers than other BNPL platforms.
The Company’s largest pre-IPO shareholders KKR, Värde Partners and Deutsche Bank retained 66.4% of shares on listing but have voiced plans to sell down over time which may spook investors. This however is the reality of IPOs that get used as exit strategies which was the case when the previous two IPO attempts failed due a the lack of buyers.
How far down they sell their shares will be of interest to most as it seems logical that interested investors wait on the sidelines until the sell-down stalls.
Latitude’s selectiveness might be a pro for investors but a deterrent for customers seeking easy, flexible financing options. Especially when there are plenty of sexier lending options than Alec Baldwin’s pitch.
Ultimately time will tell if Latitude can keep up in the BNPL space which will dictate whether investors really can ‘do better’ with Latitude or head home early.