Investors on Wall Street bid up shares of Elevate Credit during its first day of trading Thursday after the Fort Worth-based online subprime lender lowered its offering price.
By the end of the day, shares (ticker: ELVT) had gained $1.26, or nearly 20 percent, to close at $7.76 on the New York Stock Exchange.
Elevate said it expected to yield at least $69 million from the offering of 12.4 million shares, and as much as $81 million if 1.86 million optional shares are sold. The company plans to use the proceeds to pay down debt.
Initially, the company had planned to sell 7.7 million shares for $12 to $14 a share and raise more than $100 million. It was repriced late Wednesday.
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In an interview with CNBC, Ken Rees, Elevate’s chief executive officer, said that while the company raised less than it originally intended, “we’ll be able to pay down the debt we want to pay down and fuel the growth we see serving a massive market.”
Elevate is one of a new breed of so-called “fintech” companies, which are using new technologies such as data analytics to develop new financial service products. It offers installment loans and lines of credit, with brand names such as Rise and Elastic, aimed at so-called non-prime consumers who either have low credit scores, below 700, or no credit history.
Elevate calls this the “New Middle Class,” a market that has grown as wages have stagnated and traditional lenders tightened up after the last financial crisis.
“We’re serving a huge percentage of customers with terrible credit options,” Rees said, citing payday and pawn loans. He said the average interest rate across Elevate’s portfolio is about 150 percent, less than half the typical payday loan, and has been declining.
The company has been growing rapidly but is still losing money as it sets aside funds to cover loan losses.
Its revenue reached $580.4 million in 2016, up from $434 million in 2015, and is expected to reach $675 million this year. But Elevate recorded a net loss of $22.4 million last year, though its adjusted EBITDA — reflecting earnings before interest, taxes and depreciation — reached $60.4 million last year.
Rees said he expects Elevate’s chargeoffs to remain steady even if the economy turns down, citing its experience in the last economic slowdown. “What we find is that our customers are somewhat more recessionary all the time,” he said. “They’re used to dealing with a world with less savings, more income volatility ....”
Elevate, which has about 500 employees, is based on International Plaza in southwest Fort Worth.