Upstart Sets IPO Terms: Should You Buy the Fintech Stock?
By Mohit Oberoi, CFAUpdated
Upstart has priced its IPO and is expected to list this week. Of its 12 million shares on offer, 3 million are from existing shareholders and the remaining 9 million are new shares issued by the company. What's the Upstart IPO date, price, and valuation? Would it be profitable to invest in the IPO?
While the U.S. IPO market froze in March and April 2020, it has since bounced back. It has been a record year for IPOs in terms of total money raised and stock issued—the previous record was set in 1999 when the dot-com boom was at its peak.
Who owns Upstart?
Upstart founder Dave Girouard is the company’s largest shareholder, with a 22.1 percent stake. Paul Gul owns 3.3 percent of the company, while Sanjay Datta owns 1.2 percent. Overall, Upstart’s top executives own 28.3 percent of the company.
Third Point Ventures is Upstart’s biggest institutional shareholder, owning 19.5 percent of the fintech startup. Stone Ridge Trust is the second-largest, holding 9.5 percent. Khosla Ventures, Rakuten, and First Round Capital own 8.4, 5.3, and 5.2 percent of Upstart, respectively.
“YTD, more than $140B has been raised in 383 IPOs on U.S. exchanges, exceeding the previous full-year record set during the dot-com boom in 1999, according to Dealogic data dating to 1995.”
— Jason (@jasonkjackson) December 9, 2020
Pretty impressive.
When is Upstart Holdings’ IPO?
Upstart Holdings is expected to begin trading on Dec. 16. It has priced its shares at $20–$22, and they're set to list under the ticker symbol “UPST.” Based on the number of shares Upstart plans to issue, the IPO could raise up to $198 million. The IPO values the company at $1.6 billion, more than double its valuation in April 2019.
That said, Upstart’s pricing looks modest compared with that of Snowflake, which priced its IPO at a massive premium to its valuation from just months before.
1. A thread on new age lending $UPST (new IPO expected) Upstart in Dec 2020 #fintech #IPO $LC. Upstart is an "AI based" lending company that provides online loans and charges lenders an origination and service fee.
— Mukund Mohan (@mukund) November 30, 2020
Upstart Holdings' valuation
Upstart Holdings is seeking a valuation of almost 10 times its last-12-month EV-to-revenue multiple. The company’s sales have been expanding quickly but that growth has been moderating—its revenue increased by 72 percent in 2018, 65 percent in 2019, and 44 percent in the first nine months of 2020. However, this year, the COVID-19 pandemic hurt its revenue.
Should you buy Upstart Holdings' IPO?
Upstart is a growing fintech company, and its revenue more than tripled between 2017 to 2019. As its valuation is quite reasonable and it has strong growth prospects, Upstart Holdings looks like a good IPO to invest in.
