(Bloomberg) -- A stock that plummeted almost 80% in the first year after its 2018 initial public offering has become this year’s top performer in Britain’s FTSE All-Share Index.
Funding Circle Holdings Plc has surged more than 230% in the year to date, having been trading close to record lows at the start of 2024.
According to Ed Firth, an analyst at Keefe, Bruyette & Woods, the turnaround has been fueled by the sale of Funding Circle’s US operations, while share buybacks have also helped. In its latest release, the company said it has been focusing on cutting costs to simplify its business and expects to turn a profit for the full year.
“Although it’s had a big rally, it was coming from a very low base and so, to my mind, it’s still not crazy expensive by any stretch of the imagination,” Firth said by phone. Being able to focus solely on the UK market will help the company to grow, he said.
Still, even after the rally, Funding Circle shares are about 70% below the IPO price of 440 pence, giving the company a market value of about £445 million ($583 million), compared with a post-IPO peak of about £1.5 billion.
Funding Circle shares struggled after it went public six years ago. One of its key lending funds said increased personal insolvencies helped drive it to a loss, while a tough economic backdrop in 2019 hit demand for loans and prompted the company to tighten its lending criteria.
More recently, Funding Circle has undergone changes of leadership. Co-founder Samir Desai stepped down as chief executive officer in 2021 and was succeeded by Lisa Jacobs. Desai is set to leave his current role as non-executive director later this month, and sold 4 million Funding Circle shares at the end of September, according to a filing on the company’s website.
With the stock having now reversed course following two straight years of losses, KBW’s Firth sees further room for growth. He cites Funding Circle’s instant decision-lending technology, which he says gives it a competitive advantage.
“They are evolving into a more traditional, mainstream company,” said Firth, who has an outperform rating on the shares.
Funding Circle declined to comment for this story.
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