On Deck Capital Inc (NYSE:ONDK) shares have skyrocketed in the company’s first day of trading today, soaring 38%. The online lending platform priced its IPO at $20 a share, but its stock soared past $27 a share during regular trading today in its debut at the New York Stock Exchange.
On Deck raises approximately $200 million
According to The New York Times’ DealBook, On Deck Capital raised approximately $200 million in its IPO last night. The final $20 per share price of the offering was higher than the previously expected price of between $16 and $18 per share. The offering priced the online lender at approximately $1.3 billion.
On Deck Capital provides loans to small businesses using its own capital to extend lines of credit. The firm focuses on small businesses that otherwise might not be able to get a loan from a traditional large bank.
Details about On Deck’s business model
On Deck gets most of its capital from credit lines that come from banks or selling off parts of loans made through its online platform. The firm also runs a marketplace that enables investors to purchase entire loans. According to On Deck, it uses a proprietary analytics method and data to make quick decisions about small businesses that apply for loans.
The online lender said since it made its first loan in 2007, it has originated over $1.7 billion in loans and raked in over 4.4 million customer payments. Institutional Venture Partners and Google Ventures were among the backers of On Deck Capital.
On Deck Capital IPO follows Lending Club offering
On Deck Capital’s IPO follows the strong IPO of another alternative lender, LendingClub Corp (NYSE:LC), which held its offering about a week ago. LendingClub shares are up more by more than 3% today, extending the gains they have had since their second day of trading. The lender’s stock plunged in its debut but partially recovered by the end of the trading day.
LendingClub differs from On Deck Capital because on its platform, outside lenders are able to make loans to borrowers. LendingClub shares soared on Tuesday after it announced that it raised $1 billion in its offering rather than the less than $900 million that had been previously reported. The reason for the increase was because the underwriting banks opted to buy more shares.
On Deck Capital’s underwriters also have the option to buy another 1.5 million shares, reports USA Today, which they might do if demand for the lender’s shares remains strong.