Funding Circle looks to sell US arm and launches off share buyback as losses deepen
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Funding Circle, a prominent fintech firm specialising in small business lending, announced today a strategic shift in its operations aimed at curbing losses and revitalising its share value. Alongside its release of full-year results, the London-listed company unveiled plans for a £25 million share buyback initiative and disclosed intentions to divest its struggling US division.
The firm’s decision to embark on a share buyback program signals a proactive approach to address its share price, which has seen a significant decline since its 2018 initial public offering (IPO). Funding Circle’s shares have plummeted by over 93% from its IPO valuation of approximately £1.5 billion, reflecting investor concerns amid mounting losses and operational challenges.
Funding Circle reported widened losses of £33.2 million in 2023, compared to a pre-tax loss of £12.9 million in the previous year. The expansion into the US market, coupled with investments in its lend-now-pay-later offering Flexipay, contributed to the deepening losses. In light of these developments, the company intends to refocus its efforts on its profitable UK business segment and explore options for divesting its US operations.
Lisa Jacobs, CEO of Funding Circle, emphasised the company’s commitment to maximising shareholder value by addressing the undervaluation of its shares. Jacobs stated, “We believe the share price materially undervalues the business and as such will be buying back up to £25m shares,” indicating confidence in the company’s prospects despite recent challenges.
The announcement of the potential divestment of the US arm follows indications of interest from potential buyers. Jacobs highlighted the need for substantial cash and capital to sustain growth in the US, prompting the company to reassess its strategic priorities and streamline its operations.
As Funding Circle shifts its focus towards its UK business, it aims to capitalize on its core strengths while optimizing operational efficiency. The company’s FlexiPay offering, which nearly quadrupled to £234 million in 2023, underscores the potential for growth in its home market.
Investors responded positively to the news, with Funding Circle shares surging by 22% in early trading following the announcement. The company’s proactive measures and strategic realignment signal a concerted effort to navigate challenges and position itself for sustainable growth in the evolving fintech landscape.
