2014 is going to go down as one of the best years for IPOs on record. We're about to close the books on a year that will have seen, by the time it ends, around 275 new issues priced for the market -- 23% higher than last year's tally. Proceeds from 2014's IPOs currently total $84 billion, for a very healthy 54% increase.
We're not finished yet. This week will see the last of the year's market debuts, with four stocks scheduled to begin their trading lives. One in particular stands out; let's take a closer look at the company.
On Deck Capital is the firm, and its IPO is scheduled for today on the New York Stock Exchange. The firm makes its coin by lending to small businesses in need of short-term capital. It does so primarily through its online portal, although referrals by affiliated parties make up a significant percentage of its originations.
Essentially, the company is a micro-lender for such enterprises, providing up to $250,000 in financing that it promises can come through minutes after an application is accepted. Loans sourced through its portal are affected in a fairly straightforward, four-step process.
It doesn't lend to just anyone with a hot dog cart and a dream, however. It has a (somewhat loose) set of minimum requirements to nab one of its loans, stated explicitly on its web site. Businesses must have taken in over $100,000 in revenue over the past year, and be led by an individual with a personal credit score above 500.
Of course, there's a pretty price to be paid for such quick and easy financing. For full-year 2013, On Deck Capital's effective interest yield (the average return from loans outstanding) was a whopping 43%.
With credit-worthy borrowers, the company's loans start to come back to it as quickly as they were dispensed. Borrowers are required to make payments on a regular basis (weekly or daily) until the debt is retired.
That sounds punishing, but when utilized in the right way an On Deck Capital loan can help an enterprise take advantage of a business opportunity it might otherwise miss.
Lapping up the lending
Apparently, there are plenty of such enterprises. On Deck Capital says it has originated over $1.7 billion in loans since its founding in 2007. Those originations grew at a compound annual growth rate of 127% from 2011 to 2013.
The company's take has also seen a pronounced upward slope. Interest income (far and away the bulk of its top line, for obvious reasons) more than doubled on a year-over-year basis in the first nine months of this year, coming in at just under $100 million.
Costs, however, are still a burden for On Deck Capital. They continue to push it into the red on the bottom line; the Q1-Q3 2014 net loss was $14 million, only a modest improvement from the $19 million shortfall of the same period of 2013. The firm has yet to record a net profit.
Nevertheless, the company has an intriguing business profile and there seems to be a market for its services. America is, after all, a nation stuffed with the small enterprises that it targets.
On Deck Capital will trade on the NYSE under the symbol ONDK. It's floating 9.3 million shares priced at between $15 and $18 per share. The underwriting syndicate includes Citigroup, Wells Fargo's Securities arm, and Goldman Sachs.
Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs, Apple, Bank of America, and Wells Fargo, and owns shares of Citigroup, Apple, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.