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IPO market remains closed as Elevate Credit puts off deal

Aaron Pressman
Technology Reporter

Elevate Credit (ELVT), an online platform for payday-type lending, said it was temporarily delaying plans to go public this week, further postponing the opening of the initial public offering market in 2016.

The deal, which was expected to raise almost $80 million, would have been the first IPO of the year.

But with the overall stock market in turmoil and already-public online lenders among the hardest hit, Elevate's IPO faced a tough market for its planned pricing Thursday evening after the market close. The lending platform, which was spun off of the more broadly focused online lender Think Finance almost two years ago, was planning to price at $20 to $22 a share.

Elevate said it delayed the deal because of the market's overall weakness. “Although the response to the marketing of our planned IPO has been very favorable, we recognize that the current market volatility makes it very difficult to price our offering at present,” CEO Ken Rees said in a statement. “We will continue to evaluate the timing for the offering as market conditions develop."

While the entire stock market has suffered some this year, publicly traded online lenders like LendingClub (LC) and On Deck Capital (ONDK) have been absolutely crushed, down 28% and 25%, respectively, in just three weeks.

The Elevate deal also would have come as the overall market for technology IPOs has shriveled after returns for many of last year's pricings performed poorly. The volume of tech IPOs was the lowest since 2009 and high-profile deals like Square (SQ), Box (BOX) and Fitbit (FIT) were hit hard by the market sell-offs in August and December.

However, unlike many other tech startups, Elevate's financial disclosures show that its bottom-line results are moving in the right direction. The company's revenue increased 58% to about $434 million last year and it about broke even in the fourth quarter, according to unaudited financial results included in one of the company's most recent  securities filing.

Elevate offers three lending products online, all aimed at so-called non-prime borrowers. Elevate's "Rise" product is a small installment loan offering, typically less than $5,000, pitched at low-income customers. Second, and in some ways like a classic payday lender operating out of a neighborhood store front, Elevate's "Elastic" offers short-term cash advances for a small "fee," typically 5%, that works out to a very high rate of interest when calculated on an annualized basis. And "Sunny" is another small installment loan offering pitched to similar customers in the United Kingdom .

While critics of payday lending say the industry is exploiting low income borrowers' lack of access to adequate banking services, Elevate says its products are considerably cheaper than those offered by the older, retail chain-based lenders.