benaj
Member of DD Central
Posts: 5,387
Likes: 1,692
|
Post by benaj on Jul 2, 2019 15:10:03 GMT
It's below 115p now, down from 150p this morning. It was above 240p a month ago.
|
|
ashtondav
Member of DD Central
Posts: 1,812
Likes: 1,088
|
Post by ashtondav on Jul 2, 2019 15:11:47 GMT
He was in at 440 and nothing in the underlying business model / environment has changed materially since IPO so in his view just makes the recent low prices a buying opportunity. His risk from a low share price is if further money is needed it will dilute his stake much more than would have been the case with a strong price. Err, lots have changed. They’ve modified revenue guidance down by 50% for a kick-off! So if IPO price was 440p and revenue is projected to be down 50%, it would be logical to see the share price at about 200p. Add in another 50% for incompetence and 100p is probably a fair price.
|
|
thedog
Member of DD Central
Posts: 105
Likes: 111
|
Post by thedog on Jul 2, 2019 17:24:27 GMT
Isn't it revenue growth, not revenue itself, that's been halved - from 40% to 20%?
Anyway, I fully agree this has driven the s/t share price but the point I was responding to was about the cornerstone investor and why he's apparently increasing his stake. He'll be taking a long-term PE style view (the size of his stake makes it impossible for him to trade in and out so he has to take a long-term view) so is looking at where he thinks the business will be in 10 years time, not next year's profit (loss....) figures. Hence I don't think one half-year's guidance is material to his view. Now if that guidance is repeated another 2 or 3 times that may be different.....
To be clear I'm not saying he's right or wrong (or that I think the price is high or low), just that his perspective has to look beyond trading updates to the market.
|
|
trevor
Member of DD Central
Posts: 557
Likes: 380
|
Post by trevor on Jul 2, 2019 19:22:32 GMT
I wonder if a bank maybe interested in a takeover or a fund may take it private? I think the underlying idea for the business is sound, the execution is rubbish.
|
|
thedog
Member of DD Central
Posts: 105
Likes: 111
|
Post by thedog on Jul 2, 2019 19:58:45 GMT
A number of funds (Pollen St, Varde, Carval) have volume lending businesses / platforms (usually retail rather than commercial borrowers and using fund money not third party though) so could try to merge it with those to capture the economies of scale. Not at all easy to execute though. Someone mentioned earlier there's a lot of cash on the BS so if they could limit the bleed by linking to existing infrastructure the implied price for the business might be attractive.
Not sure about a bank though - would want to treat borrowers (for capital) and lenders (for deposit protection) differently to existing bank borrowers / depositors - that's an awkward distinction with regulators and public.
|
|
dorset
Member of DD Central
Posts: 281
Likes: 187
|
Post by dorset on Jul 3, 2019 9:06:18 GMT
FC is being far from honest with the market.
They claim that the fall in revenue is due to a lack of demand from borrowers (must be Brexit – everything else is).
It follows that if they have cash waiting but low borrow demand then resales on the secondary market would be cleared within the day as opposed to the 60 days wait time.
The story that would fit more closely would be some fall in borrowers due to improved or at least some DD and a fall in lender appetite. I have been taking repayments out non-stop since Sept 2017 and reading the “time to sell” blog it seems that lots of lenders are also trying to take their cash and leave.
|
|
mikeb
Posts: 1,068
Likes: 472
|
Post by mikeb on Jul 7, 2019 20:20:35 GMT
I was looking at FC shares and noticed that it is classed as software / software and computer services. Given how bad they are at software the share price is less surprising (other than it isn't zero). What share price would be more appropriate though? NaN? 504?
|
|
dorset
Member of DD Central
Posts: 281
Likes: 187
|
Post by dorset on Jul 9, 2019 11:46:32 GMT
Out on interest just read through FCs 140 page 2018 report and accounts. The first 130 pages are a tour de force in hubris followed by 10 pages of financials outlining the car crash (losses of £50m and no prospect that I can see of ever making a profit).
An interesting KPI for senior management is to “maintain a share price in excess of 440p”. That didn’t turn out too well.
Ancient Greeks maintain that hubris is followed be nemesis. IMO the nemesis, which is virtually ignored in the report, is the 2016 to 2018 loan book. Yes the punters are taking the financial hit but FC takes the crucial reputational hit.
|
|
|
Post by Deleted on Jul 9, 2019 18:26:08 GMT
Out on interest just read through FCs 140 page 2018 report and accounts. The first 130 pages are a tour de force in hubris followed by 10 pages of financials outlining the car crash (losses of £50m and no prospect that I can see of ever making a profit). An interesting KPI for senior management is to “maintain a share price in excess of 440p”. That didn’t turn out too well. Ancient Greeks maintain that hubris is followed be nemesis. IMO the nemesis, which is virtually ignored in the report, is the 2016 to 2018 loan book. Yes the punters are taking the financial hit but FC takes the crucial reputational hit. Hubris?!! From Funding Circle? Surely not!! I remember when I used to invest in secured property loans which I used to choose manually. This was time consuming but was how I liked to work. When the big changes happened and manual selection (albeit shortly after the exit from property loans) was phased out, they told me that automatic selection was to ensure fairness across the platform because not every lender had the time to spend choosing loans manually. So if everybody had no selection choice, that would be fair to everybody. I am no longer a customer due to this arrogance and have loans in one property only outstanding. I understand Funding Circle hubris very well and would not touch them with the proverbial bargepole. The IPO shareholders basically bore the cost of losses up to the IPO. They will also the bear the cost of ongoing losses. If the FC management cannot turn the operations around and make profits, then it is only a matter of time before FC goes bust. They have not had a profitable operation in all the years that they have been operating so difficult to see why that should change now. And of course a recession will test whether the FC stress testing predictions are sound or just more hubris. Then there will be the hubris of the new management when the existing management eventually get fired. There will be many people who will not be at all surprised at FC going bust. And there will be some who will be as happy as can be that FC’s arrogance towards its lenders and the poor customer service that it provides has come back to bite it and that there is some kind of natural justice in the world. To get back to the main thrust of this thread, FC lends to people that the banks do not want to lend to so difficult to see a bank wanting to take FC over. Difficult to see why anybody would want to buy a loss making operation unless they thought they could turn it around. And difficult to find reasons on the immediate horizon for small shareholders to want to buy FC shares and keep the FC share price up. I will have a small celebration when the FC share prices drops through the £1 level. Then another celebration when it drops through 50p.
|
|
adrian77
Member of DD Central
Posts: 3,915
Likes: 4,141
|
Post by adrian77 on Jul 11, 2019 9:07:43 GMT
given the fact his Danish chap is a billionaire I doubt he is stupid (Trump you cry!) and I can only guess he is interested in a 100% takeover so he can run the outfit properly - that said still a bit puzzled why he is not going in much lower or even ditching his original holding to force the price down even more...I ditched FC a couple of years ago as the writing was clearly on the wall then - and what happens when the EU debt crisis comes to a head which I am convinced it will and sooner rather than later?
|
|
etfbatt
New Member
Posts: 3
Likes: 2
|
Post by etfbatt on Jul 11, 2019 9:26:25 GMT
This is like the early days of Woodford. It is easy to join but getting out is now very difficult for investors (10 weeks plus now and rising daily). As investors charge for the door we will see the business plan is very flawed. The FCA is going to have to step in. The beginning of the end and, remember, you read it here!
The good news however is that the founders are very rich.
|
|
etfbatt
New Member
Posts: 3
Likes: 2
|
Post by etfbatt on Jul 11, 2019 9:32:17 GMT
thanks yes - meant to be FC! I wish I was 100% out of FS but like a lot of us I can't get my hands on about 25% of my loans “Me too” I see FC is down *9% today, but what I also find frightening is on TrustPilot FC is rated at 90% good/excellent. However FS is only rated 47%. As I type Radio 4 reports FC “unscheduled trading update” of difficult trading conditions. 18 of FS’s last TP reports are dire. Again Me Too if I bothered to rate FS. * rapidly dropping. If you look through the TrustPilot rating you will see that it is the borrowers that are keeping the rating up. No one else is going to lend to them so of course they are very happy! Investors however are now effectively locked in until their loans run off. make sure you switch off the automatic reinvest button.
|
|
ashtondav
Member of DD Central
Posts: 1,812
Likes: 1,088
|
Post by ashtondav on Jul 11, 2019 14:49:34 GMT
Personally, as a lender I am pleased by these updates. Demand is down (to be expected in a slowing world economy and Brexit uncertainty) and lending criteria tightened. Despite this FC now expect 20% growth in revenue. Not as good as 40%, but still pretty reasonable compared to most companies.
Of course this is Bad news for shareholders and those trying to ditch the cr@p cohorts. And I’m pleased FC aren’t selling those dodgy cohorts quickly and stuffing them to new, or reinvesting, investors. It means we get a better “mix” of loans. Good news (potentially) for those new to FC or reinvesting. Mug punters always sell out on the bad news and when blood is on the streets. Successful punters do the opposite.
I freely acknowledge I may be (very) wrong and will report back end of year on whether I have been dining on cat food or caviar.....
Either way 20% revenue growth pa ain’t bad.
|
|
dorset
Member of DD Central
Posts: 281
Likes: 187
|
Post by dorset on Jul 12, 2019 11:31:28 GMT
Personally, as a lender I am pleased by these updates. Demand is down (to be expected in a slowing world economy and Brexit uncertainty) and lending criteria tightened. Despite this FC now expect 20% growth in revenue. Not as good as 40%, but still pretty reasonable compared to most companies. Of course this is Bad news for shareholders and those trying to ditch the cr@p cohorts. And I’m pleased FC aren’t selling those dodgy cohorts quickly and stuffing them to new, or reinvesting, investors. It means we get a better “mix” of loans. Good news (potentially) for those new to FC or reinvesting. Mug punters always sell out on the bad news and when blood is on the streets. Successful punters do the opposite. I freely acknowledge I may be (very) wrong and will report back end of year on whether I have been dining on cat food or caviar..... Either way 20% revenue growth pa ain’t bad. Good luck with that. However you are in good company - HSBC brokers issued a strong buy recommendation on the 16th May with a target price of 310p per share. Perhaps they know something we ordinary punters don't?
|
|
|
Post by Deleted on Jul 12, 2019 22:26:52 GMT
Personally, as a lender I am pleased by these updates. Demand is down (to be expected in a slowing world economy and Brexit uncertainty) and lending criteria tightened. Despite this FC now expect 20% growth in revenue. Not as good as 40%, but still pretty reasonable compared to most companies. Of course this is Bad news for shareholders and those trying to ditch the cr@p cohorts. And I’m pleased FC aren’t selling those dodgy cohorts quickly and stuffing them to new, or reinvesting, investors. It means we get a better “mix” of loans. Good news (potentially) for those new to FC or reinvesting. Mug punters always sell out on the bad news and when blood is on the streets. Successful punters do the opposite. I freely acknowledge I may be (very) wrong and will report back end of year on whether I have been dining on cat food or caviar..... Either way 20% revenue growth pa ain’t bad. The issue here, as indicated in the recently published statutory annual accounts, is that although a profit margin is made on loans after taking direct costs into account (segment EBITDA), this profit margin is insufficient to cover what are classified as overhead costs. FC needs really substantive growth in loans volume to generate enough loans profit margin to cover overheads costs and it is difficult to see where that growth is going to come from. Whilst a 20% year on year growth in business would be phenomenal for many businesses, FC needs a lot more than that for many years into the future to move properly into sustained substantive profit. FC advises that it is spending around 40% of annual income on ‘marketing’ costs. This is extremely high. Given that the annual report advises that 43% of income is repeat business, it is not unreasonable to assume that the 40% of income that is spent on marketing costs is skewed towards bringing in the other 57% of business, thereby hitting hard the profit potential of new first time loans. Whilst promotion is obviously necessary for any business, any continuation of such high acquisition costs at FC is going to be a drag on the move towards profitability and upon free cash flow generation. It takes a while for new businesses to gain traction in the marketplace and losses or low profitability are to be expected in the early years. However, FC have been a key player in the UK for many years now and yet they still are not making a profit here. It is not unreasonable to question the viability of the FC business plan and to ask the senior management when they expect to achieve sustained profitability. The extremely long annual report is excruciating in the lack of focus on explaining how FC is going to move into profitability.
|
|