Consumer lender Oportun lays groundwork for IPO

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Oportun Financial Corp., which makes installment loans to U.S. consumers often ineligible for mainstream credit, is laying the groundwork for an initial public offering.

The San Carlos, Calif.-based company filed a registration statement Wednesday with the Securities and Exchange Commission stating that the lender plans to list its common stock on Nasdaq with the ticker symbol OPRT.

The number of shares to be offered and the price range have yet to be determined, the company said in a press release.

Since its founding in 2005, Oportun has disbursed more than $6.8 billion in loans to more than 1.4 million customers. The firm, which was known until 2015 as Progreso Financiero, currently operates more than 320 retail stores in 12 states.

Approximately half of Oportun’s customers do not have a valid FICO score when they are first approved for a loan, according to the company, which touts itself as a more consumer-friendly alternative to payday loans and other high-cost forms of credit.

Oportun’s core product is an unsecured installment loan of between $300 and $9,000. Annual percentage rates range from 20% to 67%, with the lower end of that span generally what the company charges returning customers, according to the SEC filing.

The securities filing also contains new details about Oportun’s financial profile and its growth strategy.

It states that Oportun recorded net income of $50.9 million in 2016, a net loss of $10.2 million in 2017 and net income of $123.4 million last year, based on generally accepted accounting principles. During the first three months of 2019, the company reported net income of $14.6 million.

Between 2016 and 2018, Oportun’s annualized net charge-off rate ranged from 7.0% to 8.0%, the company stated.

Oportun has plans to expand nationwide, and is considering either obtaining a bank charter or partnering with a bank as it eyes new geographic markets, according to the SEC filing.

The company, which has a largely bilingual workforce, also said that it is seeking to expand its demographic focus beyond its original customer base of Spanish-speaking customers.

“Our future plans require capital, so becoming a public company will mark the beginning of the next chapter in our story,” CEO Raul Vazquez said in a letter to prospective shareholders.

“We will remain committed to increasing revenue and profits, and we seek investors who believe that our mission — serving our customers with access to inclusive, affordable financial services — can create long-term value.”

As of March 31, 64% of Oportun’s principal balance related to customers from California. The company figures to benefit from a bill that appears to be on the verge of enactment in the Golden State.

The legislation, which passed a key hurdle last month, would impose a rate cap of 35% plus the federal funds rate on installment loans of between $2,500 and $9,999.

Under California’s complicated rules for small-dollar consumer credit, licensed lenders can currently charge whatever rates they want on loans between $2,500 and $9,999. Some firms charge triple-digit APRs.

An IPO would offer a chance for institutional investors that currently control a majority of shares in Oportun to reduce or exit their positions.

More than 19% of the firm’s shares are owned by Madrone Partners, which is associated with Walmart heir Rob Walton. Other large institutional shareholders include Institutional Venture Partners and entities affiliated with Greylock Partners, Fidelity Funds and Putnam Investments.

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