Can GreenSky IPO Break FinTech’s Wall Street Curse?
This past week, online lender GreenSky made its debut on the NASDAQ Global Select Market under the ticker symbol “GSKY.” Opening at $23 a share, the stock closed up 1.5% and, at the time of this writing, is currently trading for more than $24.75 a share. While that’s good news for both the company itself and the FinTech sector at large, it’s hard not to be skeptical about GreenSky’s prospects given some of the struggles that those before them have seen.
As the Wall Street Journal recalls, it was back in 2014 when peer to peer lending platform Lending Club hit the New York Stock Exchange. Although the stock saw early gains, internal troubles and other factors have caused the stock to crater since, with its current value down 77% from its IPO price. Similarly another online lender OnDeck has also seen its NASDAQ listing drop from around $24 in 2014 to less than $6 today.
So what makes GreenSky different? For one the company has quietly grown into one of the largest FinTech firms in the country by offering home improvement loans to consumers. Instead of taking on a peer to peer model like Lending Club, GreenSky allows contractors to present financing to their project customers, who can then apply via mobile app, online, or by phone for approval. This model has allowed GreenSky to keep their cost of acquisition relatively low. By contrast, as WSJ notes, Lending Club’s largest expense is marketing. As a result GreenSky has proven profitable, bringing in $139 million in net income last year.
Of course the success of GreenSky’s IPO wouldn’t just be good news for them — it could very well change the tide of FinTechs on Wall Street. Even though past IPOs haven’t panned out for other online lenders, that hasn’t stopped some startups from eyeing the idea of going public. As Autonomous Research analyst Robert Wildhack explained to the Wall Street Journal, GreenSky’s ability to woo (and hold) investors would be “a good barometer” for other startups in the space.
Considering the track record of other FinTechs, there’s definitely reason why investors might be inclined to stay away from GreenSky as well. However, given the marked differences between the company’s model and those that have come before them, it seems like this story could be a better ending. If that does happen, hopefully it will allow other online lenders and FinTech firms to also find success in going public, likely furthering the revolution that many other financial technology companies have helped bring to fruition.