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GreenSky Confidentially Files for IPO

Published 04/06/2018, 02:06 AM
Updated 07/09/2023, 06:31 AM

The IPO market is finally heating up. Dropbox (NASDAQ:DBX) and Spotify (NYSE:SPOT) both recently launched their IPOs to initial success, and now fintech company GreenSky LLC looks to be joining in. The Wall Street Journal reported on Monday that GreenSky “has confidentially filed paperwork with the Securities and Exchange Commission for a sizable initial public offering.” GreenSky apparently seeks to raise $1 billion at a valuation of $5 billion, which would make it one of the largest U.S. tech companies to go public. The IPO would launch this summer.

At this early stage, there is a great deal we do not know. GreenSky may choose to back off from its IPO plans entirely. But from what we do know, there are reasons to think that GreenSky could be successful and rise above its competitors. Here are some of the most important facts on GreenSky and why it could be an interesting investment.

The Future Of Online Lending

As noted above, GreenSky is a fintech company which uses an online lending platform to connect financial businesses and consumers. GreenSky itself states that some of its main markets range from “from Home Improvement to Healthcare to Specialty Retail”

Investors may be leery about investing in a fintech company for perfectly understandable reasons. The rising online lending industry has let businesses and consumers get loans which they may not have been able to do before, but this inevitably carries higher risk in bad loans and some people are worried about whether fintech is an example of technology outstripping government regulations. Furthermore, other fintech companies which have gone public in the past such as LendingClub Corp. (NYSE:LC) have seen their share value crater in value over the past year.

But there are reasons to think that GreenSky would be different. First, while we do not know GreenSky’s exact financial metrics as they are a private company, the Wall Street Journal reported in 2016 that GreenSky co-founder David Zalik said that “GreenSky is profitable and has bank commitments for up to $7 billion worth of loans.”

Furthermore, GreenSky uses a different strategy compared to other online lenders. Other lenders often like to position themselves as efficient institutions which will supplant banks. GreenSky by contrast depends on banks. Instead of lending money themselves, they use their online platform to connect bankers to contractors to consumers. This means that GreenSky is not on the hook if a loan defaults, and that GreenSky views itself as a tech company instead of a financial company due to this business model.

And while the fintech industry has had its troubles, it looks to have a solid 2018 and future. Like any new industry, the initial stages are filled with chaos and startups rising and falling with the sun, only to stabilize as technology and regulation match one another. Government intervention into fintech will benefit firms which can show that they have a solid history of connecting consumers and financial numbers – which appears to describe GreenSky at the moment. New technologies such as blockchain or methods of payment also represent additional avenues for GreenSky to grow. This appears to be a company which has been successful so far and yet still has plenty of potential.

Plenty Of Time

If GreenSky goes public, it will not happen until this summer at earliest and there is the real possibility that it may decide to abandon this IPO altogether. And it is far too soon to state whether this will be a successful IPO or not. But the very initial impressions appear to be good, and this could represent a chance for investors to invest in an industry which has had its doldrums but appears to be on the path towards recovery. Keep an eye on any further news such as a formal announcement to go public, and this could be a solid investment in a few months.

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