Blockchain-based home equity lender Figure Technology Solutions Inc. has a market capitalization of nearly $7 billion following strong investor demand for its shares in an initial public offering this week.
In announcing the launch of the IPO on Sept. 2, Figure said it expected to sell 26.3 million shares for $18 to $20 per share. On Sept. 9, the size of the offering was boosted to 31.5 million shares, and the expected price range increased to between $20 and $22.
When the shares were finally priced at $25 on Sept. 10, investors forked out $787.5 million for them, of which $587.6 million went to Figure and $199.8 million to existing stockholders.
But even the $25 offering price ended up looking conservative when shares of Figure began trading on the Nasdaq exchange on Thursday, with investors willing to pay as much as $38 for them.
Shares in Figure closed at $31.11 on Thursday and were up another 4 percent on Friday. At Friday’s closing price of $32.50, Figure’s market capitalization — the total value of its 211 million outstanding shares — was close to $6.9 billion.
Figure said in a deal prospectus it could ultimately raise $656.4 million after expenses if the deal’s underwriters exercise their option to purchase another 4.725 million shares at the IPO price over the next 30 days.
Since its 2018 launch by SoFi veterans Mike Cagney and June Ou, Figure has funded more than $17 billion in loans, including nearly $6 billion in home equity lines of credit (HELOCs) in the 12 months ending June 30.
Figure says its proprietary loan origination system — which automates property valuations and borrower income verification, and uses AI to review documents — has cut the time it takes to fund HELOCs to about 10 days, compared to the industry median of 42 days.
While other mortgage lenders have also invested in automation, Figure says that it’s revolutionized the process of not only originating loans but financing them.
Figure’s use of a public blockchain to record the ownership, composition and history of loans makes it a snap for investors to trade them as assets, helping the company facilitate more than $50 billion in blockchain transactions.
The public blockchain developed by Figure, Provenance Blockchain, is the system of record for the company’s Digital Asset Registry Technologies (DART) — a lien and eNote registry technology that competes with Mortgage Electronic Registration Systems (MERS).
DART monitors the Provenance Blockchain, automatically updating loan ownership information when loans change hands.
Mike Cagney
“By taking historically illiquid assets — such as loans — and putting these assets and their performance history on-chain, blockchain can bring liquidity to markets that have never had such,” Cagney said in a letter to investors Thursday. “That liquidity — coupled with the ability to achieve true digital perfection and control of the asset — opens financing opportunities that weren’t accessible before.”
Figure makes home equity loans directly to consumers, but more than 3/4 of its business now comes through a partnership network that totaled 168 lenders as of June 30.
Lenders partnered with Figure — which Cagney says include half of the top 20 retail mortgage shops — use its technology to offer HELOCs, debt service coverage ratio (DCSR) loans and piggyback second mortgages.
While home equity lending has traditionally been dominated by banks and depository institutions, Figure says its streamlined process and partnership network have helped it become the biggest nonbank HELOC provider.
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