Softbank-backed lender Oaknorth plots £300m share sale

May 20, 2020

A British challenger bank that counts Philip Hammond, the former chancellor, among its advisers, is plotting a £300m share sale that will enable some of its early investors to cash in their holdings.

Sky News has learnt that OakNorth, which ranks among the UK's best-funded fintech companies, is in the process of hiring advisers to organise a secondary offering of its shares.

City sources said that FT Partners, an advisory firm based on the US west coast, was expected to coordinate the sale.

One insider said that Rishi Khosla, OakNorth's founder and chief executive, was determined to secure a higher valuation than it achieved in its most recent fundraising.

Any transaction would involve only the sale of existing shares, rather than issuing new equity, they said.

OakNorth last raised money at the beginning of last year, when it temporarily achieved the status of landing the biggest-ever share sale by a European fintech.

That round was led by the SoftBank Vision Fund, the investment vehicle created by SoftBank, the Japanese technology investor.

This week, the Vision Fund reported a $17.7bn loss after massive falls in the value of its stakes in Uber Technologies and the owner of WeWork, the flexible office group.

OakNorth believes it is markedly different to many of its rival UK 'neobanks' - technology-enabled financial services groups set up after the 2008 financial crisis which are not saddled by branch or other legacy costs.

The jewel in Mr Khosla's business, he believes, is the technology platform that OakNorth licenses to other banking groups.

Its 'platform' clients include Modern Bank and Customers Bank in the US, with more expected in the coming days, according to a source close to the company.

The source added that OakNorth was not planning to issue new equity because the investment led by the SoftBank Vision Fund last year meant it was adequately funded.

According to accounts at Companies House for its banking division, OakNorth had lent a total of £3.1bn at the end of last year, with £2bn in customer deposits.

Pre-tax profits for 2019 were £65.9m, with the company insisting that it was also profitable at a group level.

It was unclear on Wednesday which of OakNorth's shareholders would be keen to sell part of their stakes in a secondary sale.

Earlier investors in the group include The Clermont Group, a Singapore-based firm, Toscafund, Coltrane Asset Management and Indiabulls.

If it succeeds in raising money at a premium to its last valuation, it would contrast with the fortunes of other leading names in the UK fintech sector.

The Financial Times reported this week that Monzo, the digital bank, planned to sell new shares at a 40% discount to its last round, while Monese has abandoned plans for a £100m fundraising.

Zopa, the peer-to-peer lender, is also raising £140m at a reduced valuation as it awaits confirmation of a full banking licence from regulators.

OakNorth focuses on lending sums of up to £20m to entrepreneurs, and broke even before it had marked its first year of operations.

Its bank launched in 2015, and has suffered only limited loan defaults in recent months.

Mr Khosla has assembled an advisory board packed with senior business and political figures, including Lord Turner, a former chairman of the City watchdog, and Lord Maude, the former trade minister.

Mr Hammond was appointed in January.

OakNorth declined to comment.

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