rose as much as 50% in its first day of trading.
The stock opened at $26, hit a high of $30.01 and closed Wednesday at $29.47, up 47.35%.
The solid first day came after Upstart (ticker: UPST) priced its deal at $20 a share, the bottom end of the range of $20 to $22 it had told investors to expect. The lending startup sold 12 million shares, raising $240 million.
BofA Securities and Citigroup are the lead underwriters on the deal.
Dave Girouard, who once led Google’s enterprise department, launched Upstart in 2012 with the goal of giving consumers better access to credit. The San Mateo, Calif., startup seeks to partner with banks and offers a cloud-based AI lending platform to help consumers get loans. Since its founding, Upstart’s bank partners have originated more than 620,000 personal loans. About 70% of Upstart’s loans were automated, according to the prospectus for the deal.
“Having built a career in Silicon Valley, I always dreamed of taking a company public,” Girouard told Barron’s.
Upstart, which has raised $165 million in funding, swung to a profit this year. The company reported net income of $4.5 million for the nine months ended Sept. 30, compared with $9.9 million in losses for the same period in 2019, the prospectus said. Revenue rose 46% to $144.2 million. Being profitable “is unique in the fintech world we live in,” Girouard said.
Banks are heavily regulated and many are dealing with decades of legacy IT systems. This has spurred some fintechs to compete with banks and seek out bank charters. Upstart is different and considers itself more of a technology company, than a new-age bank, Girouard said. The company has 10 bank partners and 98% of revenue comes from the fees it charges them, the prospectus said.
“We like to partner with banks and help them succeed,” he said.
While others may be using AI at the margins, Upstart is one of the first to really build an AI platform for lending, he said. He pointed to autonomous vehicles, or computers talking back, as comparable ventures. “Bringing modern AI technology into the banking world is no small task,” Girouard said.
By using artificial intelligence, banks can improve their economics dramatically, he said. Upstart’s AI platform can approve two to three times more applicants than large U.S. banks at the same loss rate, he said. Upstart is also able to lower losses and cut origination costs by using AI, Girouard said.
Right now, consumers on Upstart’s lending platform are offered unsecured personal loans ranging from $1,000 to $50,000, the prospectus said. Upstart recently began providing auto loans in Florida and plans to roll out to more U.S. states over the first half of 2021, he said.
Plans for coming years include expanding into mortgages, Girouard said.
Write to Luisa Beltran at firstname.lastname@example.org