A fast-growing Fort Worth online lender wants to go public, but it may face a hard sell on Wall Street.
Elevate Credit, which offers high-interest installment loans and lines of credit to subprime borrowers — in other words, people with very low credit scores — filed papers last month to go public with the Securities and Exchange Commission.
Elevate, based on International Plaza in southwest Fort Worth, was spun out of Think Finance last year. Targeting consumers with credit scores of less than 700 with small loans ranging from $500 to $5,000, the company has found a big market at a time when regulators are cracking down on another source of cash for strapped consumers: payday lenders.
According to its registration statement with the SEC, the company has provided $1.2 billion in short-term credit to about 450,000 customers since launching its current product line in 2013, which sports optimistic brands such as Rise, Elastic and Sunny. Revenues grew 280 percent in 2014 to $273.7 million, and another 67 percent in the first nine months of 2015, according to the company’s SEC filing.
In a letter included in the documents, CEO Ken Rees says Elevate is targeting what he calls the growing “New Middle Class,” a group with little to no savings, urgent credit needs and limited options. “Banks haven’t stepped up to serve this market and legacy non-prime lenders haven’t innovated. We believe that Elevate provides the answer,” he wrote.
But even charging an annual percentage rate that averages about 180 percent for its portfolio — yes, that’s 180 percent interest — Elevate is losing lots of money. Its net loss in 2014 was $54.6 million, and $20.1 million in the first nine months of this year.
Why? Lots of folks don’t pay the money back. Net charge-offs in 2014 were $139 million — or 51 percent of revenues, according to Compass Point Research, leading analyst Michael Tarkan to conclude that the reception from investors may be muted.
“Increasing fears around consumer credit, recent valuation multiple compression among the publicly-traded marketplace lenders and other consumer finance entities, and increased regulatory risk surrounding the payday lending industry suggest that the appetite for an online installment lender that remains unprofitable will be limited,” he wrote last week.
KLM departing DFW
DFW Airport has seen a wave of new foreign carriers coming to North Texas, but it lost one when KLM Royal Dutch Airlines said it would not be restarting its seasonal service to Amsterdam.
Instead, KLM announced it will launch seasonal service between Amsterdam and Salt Lake City, a hub for Delta Air Lines. KLM and Delta are both part of the SkyTeam alliance.
The Dutch carrier had been operating flights five times a week during the summer, with its last flight departing Oct. 24. It had used an Airbus A330 on the route.
With the departure of KLM, there are four European destinations with nonstop service from DFW: London, Madrid, Frankfurt and Paris. Airberlin plans to add nonstop service from Dusseldorf, Germany, in May.
Even more gas in Barnett Shale
With oil and gas prices in the tank, drilling in the Barnett Shale sunk to lows this year, with the area rig count falling as low as one for a week.
But producers have reason not to give up on the field: It may hold far more natural gas and oil than previously thought.
The U.S. Geological Survey said this week that the Barnett, which kicked off the shale fracking revolution in the U.S., contains 53 trillion cubic feet of natural gas, twice as much as a previous estimate released in 2003. There are also 172 million barrels of shale oil and 176 million barrels of natural gas liquids, the report says. The estimate covers undiscovered, technically recoverable resources.
Thank fracking. In a statement, the agency said the substantial increase “is largely due to the oil and gas industry’s switch to primarily horizontal drilling within the Barnett, paired with hydraulic fracturing. The 2003 USGS assessment relied solely on vertical drilling.”
While the Barnett is big, it’s not the biggest. In 2011, the USGS estimated that the Marcellus Shale in Pennsylvania and other Northeastern states contains 84 trillion cubic feet of undiscovered natural gas.