Non-bank lender hits ASX with a belly flop

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    Pepper Money hit the ASX with a bit of a belly flop with its listing Tuesday, with shares tumbling as much as 17% below its listing price of $2.89 on its first day of trade.

    Pepper debuted on the ASX boards on Tuesday, opening at $2.61 and falling as low as $2.41 in the day’s trading, according to The Australian. The shares closed at $2.61, 9.6% below the IPO price.

    It was a disappointing debut for Pepper, which raised $500 million in the year’s biggest IPO so far – even increasing the size of the initial offer by $50 million to meet strong institutional interest. The IPO valued the company at $1.3 billion.

    The IPO funds will be used for a partial repayment of a $275 million bridge facility, as well as in the business, The Australian reported.

    Pepper is one of the non-bank lenders that have raised billions of dollars through residential mortgage-backed securities (RMBS) in recent months, taking advantage of the booming housing market and sharp appetite from global investors.

    Read more: Non-bank lender Pepper Money on how it intends to grow post-IPO

    That appetite was due largely to the attractive yields on offer, Pepper CEO Mario Rehayem told The Australian.

    “The market has seen unprecedented levels of demand in regards to RMBS and asset-backed security paper, and that’s because businesses like ours that do fund through the debt capital markets are going to provide yield that is appealing for investors not only in Australia, but around the world,” Rehayem said. “Every investor in the world has the same appetite at the moment, and that is a good long track record of strong credit performance mixed with ability to generate good yield. It’s appealing, and that what they are gravitating to.”

    Pepper posted a 2020 profit from continuing operations of $99.4 million, a 71% jump over the prior year.

    Ryan SmithRyan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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