Small business fintech Prospa subject to $74 million takeover bid

Innovative small business lender Prospa is subject to a takeover bid worth nearly $74 million, which could sweep the fintech off the Australian Securities Exchange (ASX) five years after its much-hyped but tumultuous public listing.

Salter Brothers Tech Fund intends to take Prospa private by paying 45c for each share on issue, a 26% premium to its recent average trading value of 36c per share.

Existing shareholders also have the option to convert shares into a new and unlisted holding company.

In a statement shared on the ASX, Prospa chair Gail Pemberton recommended the deal to shareholders on behalf of the fintech’s independent board committee.

The transaction “is in the best interests” of shareholders, which “delivers certainty of value… in what has been an otherwise illiquid market for Prospa Shares”.

News of the proposal arrived the same day as Prospa’s half-year financial results, showing EBITDA of $13.7 million — before taking provisions for expected credit losses into account, which took EBITDA to a loss of $3.8 million.

Greg Moshal, Prospa co-founder, said the business was continuing to improve its risk management framework in a trying time for small business borrowers.

The takeover proposal is a landmark moment for the lender, which hit the ASX with a market valuation of $610 million.

Here are some of the key moments in Prospa’s corporate life to date.

2012:

Prospa was founded by Moshal and Beau Bertoli, and was inspired by the roadblocks keeping small businesses from accessing much-needed capital.

Legacy financial institutions are capable of providing major up-front loans, “but when your local café needs $14,000 because their air-conditioning broke, or a plumber is tendering on a job for a builder, then wins it and needs $20,000 of materials to get the job going and completed, there’s no real solution for that,” Bertoli told SmartCompany in 2022.

March 2016:

Prospa claimed a headcount of 85 people and the issuance of nearly $100 million in loans since its formation.

That year, Prospa also won SmartCompany‘s Smart50 award, in recognition of its revenue surging to $22 million.

October 2016:

The venture earned even more acclaim with its listing on the Fintech 100 list, alongside contemporaries like Afterpay and Brighte.

Australia “may have started late” compared to globally established fintech markets, “but we’re building really good businesses across the broad fintech sector,” Bertoli said.

February 2017:

Prospa revealed a $25 million cash injection, led by AirTree Ventures.

In addition, the venture revealed its plan to hire an additional 100 staff, and a goal of writing $500 million in loans.

June 2018:

The fintech planned its next major evolution, a listing on the ASX, for the middle of 2018.

Prospa said the issue of more than 40 million shares would pump an extra $146.5 million into the venture, giving it a market value of $576 million.

But the lender took the highly unusual step of postponing its debut just 30 minutes before its scheduled listing.

That 48-hour delay turned into an indefinite postponement.

Prospa said the decision was made in response to queries raised by ASIC in relation to the terms of its small business loans.

“Over the past 48 hours, Prospa has constructively engaged with ASIC to review its current loan terms and has provided detailed information in response to the regulator’s queries,” a company statement read.

September 2o18:

Following the ASIC review, Prospa agreed to amend a slate of lending contract terms.

Those changes pertained to the early repayment of loans, and the ability of Prospa to vary its fees.

“Prospa looks forward to continuing to improve financial inclusion for small business owners,” Prospa’s general counsel Nicole Johnschwager said in a statement.

June 2019:

Prospa takes a second run at its IPO, raising an additional $109.6 million to propel the venture to a valuation of $610 million.

At the time, Prospa forecast 26% revenue growth for the calendar year.

“As a public company, our guiding principles won’t change,” Bertoli and Moshal said.

“We’ll continue to strive to exceed our customers’ expectations and deliver for all stakeholders.

“We aim to build a company that creates value over decades, not just years.”

August 2020

The COVID-19 pandemic and its associated economic turmoil had other plans.

In August 2020, Prospa booked a $19.5 million EBITDA loss, driven primarily through the provision for potential credit losses.

February 2022:

In a textbook demonstration of how small businesses adapted to pandemic conditions — and the easing of public health restrictions — Prospa itself prospered in 2022.

Loan originations spiked by 75% in the first half of the financial year, The Australian reported.

February 2024:

Prospa reveals the takeover proposal to shareholders while claiming the business has provided $3.9 billion in funding to small businesses to date.