To say today has been a long time coming for Latitude Group Holdings Ltd [ASX:LFS] is an understatement.
After trying twice in recent years — once in 2018 and once again in 2019 — to make its ASX debut, the company has finally stuck the landing. Officially listing at midday today.
A drawn-out conclusion to a painstaking journey, with the added frustration of a lower-than-expected valuation compared to its previous IPO tilts.
With a $2.8 billion valuation though, the company has finally gone public. Floating its shares at $2.60 each. And at time of writing the LFS share price is now up 8.86% to $2.83.
So, should investors jump in on the Latitude action?
Third time’s the charm
The obvious question investors need to ask themselves is why it took so long for Latitude to make it to the ASX.
Two failed IPO bids are bound to raise some eyebrows. Especially when the first was shrouded in speculative rumors that it would be put on hold following the Hayne Royal Commission. And the second was pulled due to a lack of foreign investor interest.
So, what has changed this time around to ensure it went ahead?
Well, for starters, this time around they made damn sure they had plenty of investor support. With roughly $120 million of the $150 million raised capital drummed up from local institutional investors. Leaving $30 million worth of stock to be spread across retail investors.
However, it was a recent and last-minute deal with Shinsei Bank (worth an estimated $300 million) that is the real cherry on top. Showcasing the kind of foreign investment support it was lacking last time around.
But that certainly doesn’t guarantee that Latitude is a good investment.
To quantify that we need to look at their balance sheet…
For the 12 months ended 31 December, Latitude reported $1.05 billion in income. Seeing a slight drop year-on-year from the $1.2 billion in 2019.
It is their bottom-line result though, a $49.6 million net loss, that is far more concerning. Which is a dramatic reversal of the slim $929,000 profit they made in 2019.
This no doubt played into the overall weaker valuation of the IPO. Casting some concerns over the growth within Latitude.
After all, with a focus on lending — particularly in personal and car loans — Latitude is aiming to ‘disrupt’ the Big Four banks. An objective that will require them to make significant headway in their product offering and customer take-up.
However, it is that very potential that is no doubt attracting investors. With this company following a similar strategy to direct competitor Afterpay in the way it is branding and positioning itself.
As for whether it will work though, only time will tell.
What’s next for Latitude share price?
Investors in Latitude will want to keep a close eye on growth metrics. Not just on the balance sheet, but also in terms of customers and new products.
After all, despite being the largest IPO of 2021 so far, this is undeniably a growth stock.
The good news for management at least is that the sentiment so far is upbeat. As can be seen by the rising share price this afternoon, on a day when the broader market is under pressure.
However, long term it is hard to gauge whether Latitude’s fairly formulaic approach to new finance will be as successful as it hopes.
We’d suggest considering looking at far more disruptive and innovative fintech stocks. Companies that may carry much smaller valuations, but also offer up the possibility of much bigger gains.
For more information, check out our full report, right here.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
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