Toronto-based FinTech startup Propel Holdings is launching an Initial Public Offering (IPO) on the Toronto Stock Exchange, targeting gross proceeds of $60,937,500 CAD.
In addition to strengthening Propel’s financial position, the startup plans to use the proceeds from the IPO to pursue its growth strategies, including scaling up its products, and expansion into four to eight states in the United States. The offering is expected to close on or about October 20.
Founded in 2011, Propel uses a proprietary AI-powered online lending platform to help consumers access credit, of which Propel offers two types.
“Our AI infrastructure is designed such that the more applications and loans we process, the better and more efficiently our platform operates.”
One is an installment loan: a six to 18 month fixed term, fully amortizing loan with a fixed payment schedule. The other is a line of credit that allows consumers to draw cash advances and repay any amount up to their available credit with a minimum payment due each period.
In its prospectus, the 330-person company said it will also target acquisitions. “We are regularly assessing potential acquisition opportunities that would assist in expanding our geographic footprint and/or add new products to our portfolio,” the company stated in its prospectus.
The FinTech startup already operates in 28 US states and positions itself as “committed to credit inclusion, and helping underserved customers by providing fair, fast, and transparent access to credit.”
Propel has invested over $12 million into its proprietary platform, which is maintained by a 30-person team in Toronto, according to the prospectus.
The startup said that over the past eight years its technology platform has been integrated with more than 50, third-party data platforms, including bank and marketing partners, underwriting data sources, and payment processors.
For the six months ending in June, Propel’s platform processed on average 20,000 unique applications per business day, 88 percent of which received a fully automated credit decision.
The company said in its prospectus that its proprietary underwriting algorithms are embedded in its technology platform, which has a direct integration with more than 10 data providers. The latter include multiple credit reporting agencies and alternative underwriting data providers, and incorporates over 1,000 data points in rendering automated initial credit decisions.
“Our AI infrastructure is designed such that the more applications and loans we process, the better and more efficiently our platform operates,” the company wrote in the prospectus. “Propel also benefits from having accumulated almost 10 years of proprietary historical data from over 758,000 loans originated through the platform and millions of unique customers underwritten through our proprietary algorithms.”
The startup also claimed that its AI-powered underwriting procedures look past traditional credit scores to identify consumers with the ability and willingness to repay, while maintaining Propel’s target loss rates.
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“We believe the powerful AI engine has been a significant factor in driving the overall missed payment rate down to less than 4.6 percent in the six months ending June 30, 2021 from over 10 percent in Fiscal 2018,” Propel noted.
As at June 30, the FinTech startup had facilitated over 758,000 personal, unsecured loans and lines of credit through its platform, with approximately $515 million being advanced to over 492,000 unique customers. In fiscal 2020, revenue, operating income and net income were $73.5 million, $17.3 million and $7.3 million, the company reported in its prospectus.
Propel generated $8 million of net income in the six-month period ended June 30.
The company was founded by Propel CEO Clive Kinross. Shortly after, Noah Buchman, Sheldon Saidakovsky and Jonathan Goler joined the team as co-founders. The original shareholders invested $4 million of equity in the company.
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In mid-2019, Propel closed on a $35 million credit facility with a group of lenders to provide the necessary debt capital for the growth of its CreditFresh brand. In December 2020, Propel increased the size of its CreditFresh debt facility from $35 million to $45 million.
Propel increased the CreditFresh debt facility to $120 million in March, adding additional debt capital partners.
The company successfully completed a $15 million preferred Series B round led by the Raptor Group in June.
Propel’s IPO comes during a new boom in technology offerings. One analyst told BetaKit that it was the busiest time for Canadian IPOs he’d seen since the dot-com era.
Among the IPOs this year, the payment processing company Nuvei officially closed its US IPO in October, raising a total of nearly $425 million USD, while Thinkific raised $184 million in its stock market debut in May.