Trade Me takes 15% stake in Harmoney for $7.7 million
Trade Me Group, New Zealand's biggest online auction site, has paid $7.7 million for a 15 percent stake in Harmoney as part of the country's only licensed peer-to-peer lender’s $10 million capital-raising.
Auckland-based Harmoney launched its online platform last September, where it matches retail borrowers and lenders, and determines lending interest rates on the credit risk of the borrower. As a strategic partner, the Wellington-based auction website will use its "trusted consumer brand" and "broad audience" to cross-promote the new lender as it ventures into consumer finance, it said in a statement.
"It is early days but we think there's a lot of potential for P2P lending to work well in New Zealand, and of course consumer finance is a large and well-established industry," Trade Me chief executive Jon Macdonald said. "To us it looks like an area of the market that will undergo a long-term structural shift online – and we believe Harmoney is well-placed to take advantage of this."
In a separate announcement, Harmoney said Trade Me's stake was part of its $10 million capital raise, having received interest from New Zealand and offshore investors. Trade Me joins Heartland New Zealand, which took a 10 percent stake last September, for an undisclosed sum. The Christchurch-based bank also offers a funding line through the online platform.
Harmoney was the first platform operator to receive a peer-to-peer licence under the new Financial Markets Conduct Act, which came into effect on April 1, providing legislation for a regime to match lenders with borrowers, with a $2 million cap on the amount allowed to be borrowed. The platform is looking to lure both investors and borrowers, offering loans of up to $35,000 with interest rates lower than credit cards for borrowers, and the possibility of a 12 percent risk adjusted return for lenders.
In August, Trade Me flagged earnings would remain subdued in the coming year as it reinvests into its business after posting slower profit growth in 2014. The company is diversifying beyond its trading website, in a bid to lift earnings growth.
Shares of Trade Me fell 0.3 percent to $3.72 and have declined 12 percent over the past 12 months, underperforming the NZX 50 Index's 14 percent gain in the same period. The stock is rated an average of 'hold' based on the opinion of nine analysts surveyed by Reuters, with a median price target of $3.80.
Shares of Heartland rose 0.9 percent to $1.14 and have advanced 33 percent over the past year, outpacing the benchmark index. The stock is rated an average of 'hold' according to the consensus of three analysts surveyed by Reuters, with a median price target of 97 cents.