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Date : 20/04/2021

Things To Watch For Latitude Financials IPO

Headquartered in Melbourne, Australia, Latitude is a digital payments platform that also has an instalments and lending business. They offer products and services aimed at customers and merchants by leveraging their technology and database of customer information. Their products include – home loans, car loans, credit cards, insurance, etc.

Latitude’s Business‑to‑Business‑to‑Consumer model focuses on supporting its partners to acquire customers combined with direct customer engagement aimed at increasing product utilisation and graduation to other products. Latitude offers its customers in Australia and New Zealand Instalments (‘L‑Pay’) products and Lending (‘L‑Money’) products. Insurance products were also offered until 2020 and are in the process of being relaunched as of early 2021.

Latitude pulled out from their IPO plans last year due to “bad timing”, however, they have now lowered their IPO price to $1.78 a share, down from the range of $2.00 – $2.25 that was previously revealed prior to pulling out. The lower price means that Latitude will be raising around $1 billion. Given the lower price and as a result a lower market cap of around $3 billion now (as opposed to the $4 billion market cap), shares are expected to trade with a positive momentum.

In its third attempt, Latitude Financial shares is finally set to IPO at a $2.8 billion valuation. Shares are being offered at $2.6 a share in the float. After being affected by the pandemic where Latitude faced decreased demand and high costs, leading to an 18% decline in profits during FY2020, the business is set to be performing very well now that recovery is underway, and with that recovery, so is the lending business.

Latitude has around 2.8 million customers and over 3400 retail partners. They are tied-up with Apple, Harvey Norman, JB Hi-Fi, etc as partners. Given their business model, they have several competitors from each segment. The highest profile of these would be the BNPL players – Afterpay and Zip Co. In the lending space, Latitude competes with Money3 and the banks.

If the IPO is a success, there may be potential exits lined up by the owners of Latitude somewhere along the near-term. Deutsche Bank, private equity giants – KKR and Varde Partners are among the large shareholders of the company and if history suggests anything, it is that private equity investors will exit if and when their investment is successful.

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