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|Payday lender Wonga plans flotation|
|Sunday, 03 June 2012 18:57|
The Press Association- Payday lender Wonga is reported to be considering a US stock market flotation that could value the business at more than £1 billion.
A "beauty parade" to choose two banks to lead the process is under way but no decision has been taken on whether to proceed, said the Sunday Telegraph.
Its report added that Wonga has rejected London as a venue for a market listing and will look to New York's Nasdaq exchange for the float.
Technology shares have fallen in the wake of Facebook's ill-fated flotation but using a multiple of 12 or 13 historic revenues a listing would still value Wonga in the region of £1 billion.
The company, which was recently criticised by the Office of Fair Trading, was founded in 2007 and has become one of the biggest players in a rapidly expanding sector. Consumer Focus figures indicate that the payday loans market increased from 300,000 borrowers in 2006 to 1.9 million in 2010.
The industry has been accused of preying on those in financial trouble, prompting the OFT to investigate whether some firms target people unsuitable for credit and are rolling over loans so that the charges escalate and they become unaffordable.
Payday lenders have argued that they offer a much-needed service to customers and their high interest charges are often more transparent than those of mainstream banks (photo-Wonga.Women).
Wonga's current backers include Balderton Capital, known for its investment in LoveFilm and Betfair, and Greylock Partners, one of the original investors in LinkedIn.
It was co-founded by current chief executive Errol Damelin and recently announced plans to offer small businesses loans of between £3,000 and £10,000 within 15 minutes.
The company, which uses automated risk-processing software, was criticised by the OFT last month for letters and emails that without appropriate justification suggested that some customers may have committed fraud. Wonga said it planned to appeal the ruling by the OFT.