Shares Of Lender Upstart Gain 47 Pct After IPO

Upstart, which works to partner banks with customers looking for loans, saw its shares surge 30 percent upon its public debut Wednesday (Dec. 16), according to a report from MarketWatch.

The first trade went for $26 on the Nasdaq, which was at the lower end of Upstart’s predicted range, and the company was able to make $180 million through the initial public offering (IPO) after selling 9 million shares. Other selling shareholders also sold 3 million extra shares, MarketWatch reported.

In its prospectus, Upstart said most banks stick to “simple, rules-based systems” when making traditional lending decisions. But those systems often come with rigid and limited variables, and Upstart said that leads to many credit-worthy individuals being shut out and millions paying more than they have to, according to MarketWatch.

Upstart doesn’t do the trading itself, the report stated, so the company lacks the risk of having millions of loans on the books.

CEO Dave Girouard, speaking with MarketWatch, said people in the lending industry have been looking for “a fountain of youth that can change the game in terms of accuracy,” and he said artificial intelligence (AI) and cloud computing could be transformational for the industries in the next several decades.

Girouard also said the pandemic hadn’t really affected the returns the bank partners saw on loans. To him, this is more indication that AI-based lending can help through responding faster and more accurately, the report stated.

Upstart Co-Founder and Head of Product Paul Gu told PYMNTS last year that speed is the name of the game for those looking to get into lending as slow payouts can frustrate customers.

Gu said the company typically makes its payouts with ACH transfers instead of relying on checks. Same-day ACH deposits money straight into a customer’s account, and funds usually appear the next business day.

Around 67 percent of Upstart loans, in addition, are fully automated on the platform.