Weekly Update #252: S-1 Notes: Greensky

EquityZen has produced these weekly updates for secondary investors, shareholders and company representatives.

If you find this useful, subscribe to our weekly newsletter!

Weekly Update

Live offerings, preview listings, and some analysis on the pre-IPO space

In order to view EquityZen's Investment Offerings, you must be an Accredited Investor.

Verify your Accredited Investor status

Hello Investors,

S-1 Notes: Greensky

FinTech company GreenSky filed their S-1 last week. GreenSky serves as a technology middleman between merchants, consumers and banks to facilitate financing for bigger-ticket purchases like home improvement items (it has also recently expanded into elective medical procedures). The company, which is largely PE-backed (and not VC-backed), plans to list on the NASDAQ with the ticker “GSKY”.  GreenSky was among EquityZen’s IPO predictions included in our recent EquityZen IPO Outlook - Q2 Update.

GSKY appears set for a strong FinTech debut, with the midpoint of its pricing range pointing to a $4.2B valuation. We estimate this translates to a forward P/S of 11-12x, assuming revenue grows 10-15% from its 2017 level of $325M. This compares favorably to the ~1-2x P/S multiples observed among FinTech lenders like Lending Club and On Deck.

Source: Ycharts and EquityZen

While seemingly pricey at first glance, GreenSky’s model is differentiated from peers in several key ways that we believe likely justify a stronger valuation. Some (quick) notes from the filing:

Attractive revenue growth. GreenSky realized ~50% revenue growth in 2016 and just over 20% in 2017, above that of its peers. The company’s revenue is derived almost entirely from transaction fees on loans originated using its platform. GSKY is looking to expand into other industry verticals beyond its current home improvement and elective healthcare focus (e.g. online retail, auto repair and jewelry loans), which we believe could pave the way for further revenue growth streams going forward.

Source: Company filings

A de-risked approach to the online lending market. GreenSky relies on established banking partners (incl. SunTrust, Regions and Fifth-Third Bank) to originate and own the loans facilitated through its platform. As such, the company does not directly bear credit risks or funding risks related to these loans. The latter has been a particular concern at other FinTech lending businesses that have historically relied on whole loan sales to fund their operations.

Efficient marketing. GreenSky spends significantly less on sales & marketing than peers. At least part of this is likely due to GreenSky's strategy of marketing to merchants, which in turn offer lending options to their customers at point of sale. This compares to models that reach out directly to end-consumers -- a much larger and likely costlier market to target.

Source: Company filings

Strong profitability. The advantages of GreenSky’s business model are evident in it’s solid profitability over recent years -- unique among the FinTech lending cohort.  
Source: Company filings

Other items we are reading:

Catherine Klinchuch
Finance & Research Lead, EquityZen


Funding Rounds Since Last Week

Invest in Grail 
Grail - [GRAIL Announces $300 Million Raised in Oversubscribed Series C Financing]
Invest in Orbbec 
Orbbec - [Ant Financial Leads $200M Series D Round In Chinese Motion Sensing Firm Orbbec]
Invest in Iora Health 
Iora Health - [Iora Health Raises $100 Million in Series E Financing]
Invest in Outreach 
Outreach - [Outreach Raises $65M in Series D Financing]
Invest in Honor 
Honor - [Naspers Ventures leads Series C round for home care company Honor]
Invest in SignalFx 
SignalFx - [Cloud operational intelligence firm SignalFX raises $45M]
Invest in Parsable 
Parsable - [Parsable Closes $40M Series C Funding Round] 

Have questions?