On Deck Jumps in Debut After $200 Million IPO of Web Lender

On Deck Capital Inc., a Web-based lending platform for small businesses, surged in its trading debut after raising $200 million in an initial public offering.

On Deck, which uses software to assess a business’s creditworthiness before lending money, jumped 40 percent to $27.98, giving the New York-based company a market value of $1.85 billion.

Last week, LendingClub Corp. soared in its trading debut after an increased IPO, the first peer-to-peer, or marketplace, lender to go public. While both LendingClub and On Deck are alternative lenders to traditional banks, their models are very different. LendingClub focuses mostly on consumers, whereas On Deck caters to small businesses.

On Deck funds loans through debt facilities and securitization of small-business loans generated by On Deck, while LendingClub’s investors are individuals and institutions.

“Investors will be receptive to On Deck’s IPO because of LendingClub,” said Michael Brown, a general partner at Battery Ventures, who specializes in software and financial services. “But as you look at the two businesses, outside the macro theme of finance, they’re very different.”

LendingClub raised a greater-than-expected $1 billion in its IPO including an overallotment, as investors sought exposure to the first marketplace lender to sell shares to the public. The stock jumped 56 percent in its Dec. 11 debut and now has a market value of $9.6 billion.

Interest Income

On Deck was founded in 2007 by Mitch Jacobs, a serial entrepreneur in digital transactions. His first hire at On Deck was Noah Breslow, 39, the company’s chief executive officer and chairman since June 2012. In seven years, On Deck has delivered more than $1.7 billion in loans, filings show.

On Deck posted $107.6 million in gross revenue in the nine months through September, which is more than double the same period last year. The company generates most of its sales from interest income. On Deck plans to use the proceeds for marketing activities, product development and to fund a portion of the loans made on its platform.

Existing investors, who don’t plan to sell shares in the IPO, include RRE Investors LLC, with almost a 13 percent stake following the offering, and Institutional Venture Partners with 12 percent. Google Inc.’s Google Ventures and Tiger Global Management LLC also hold shares.

Morgan Stanley, Bank of America Corp., JPMorgan Chase & Co., Deutsche Bank AG and Jefferies Group LLC managed the offering. The stock is listed on the New York Stock Exchange under the symbol ONDK.

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