SAN MATEO, Calif. - Upstart (NASDAQ: NASDAQ:UPST), a prominent artificial intelligence lending marketplace, has entered into a significant agreement with Blue Owl Capital Inc. (NYSE: OWL), securing a programmatic purchase commitment of up to $2 billion. This commitment, aimed at acquiring consumer loans via the Upstart platform, is to be fulfilled over the next 18 months. The deal commenced with Blue Owl’s acquisition of a $290 million personal loan portfolio in September.
The transaction was facilitated by Atalaya Capital Management LP, which specializes in alternative credit investments, and was recently acquired by Blue Owl on September 30. This acquisition is a strategic move for Blue Owl, expanding its alternative credit footprint and complementing its dominance in direct lending.
David Aidi and Ray Chan, Co-Heads of Financial Assets at Blue Owl Alternative Credit, expressed their enthusiasm for the partnership, highlighting the potential to enhance the efficiency of the consumer lending process. Sanjay Datta, CFO of Upstart, echoed these sentiments, noting the partnership as one of the largest purchase commitments for the company and a catalyst for expanding access to affordable credit.
ATLAS SP Partners, backed by Apollo funds, will be providing the debt financing necessary for the loan purchases. This collaboration underscores the growing trend of partnerships between technology-driven lending platforms and established financial entities.
Upstart's platform, founded in 2012, serves as a bridge connecting consumers with banks and credit unions, utilizing AI to offer optimized credit products. The company boasts a high rate of instant loan approvals and a commitment to an equitable lending process across demographic lines.
This partnership is based on a press release statement and aligns with Upstart's mission to improve lending experiences and outcomes for both borrowers and lenders. It represents a strategic step for both Upstart and Blue Owl as they navigate the evolving landscape of consumer finance.
In other recent news, Upstart Holdings Inc . has been the focus of several significant developments. The company announced a $300 million offering of Convertible Senior Notes due in 2029, aimed at qualified institutional buyers. The proceeds are planned for financing capped call transactions and repurchasing part of its outstanding 0.25% Convertible Senior Notes due in 2026. Mizuho Securities reaffirmed an Outperform rating on Upstart's shares, with a steady price target of $48.00, citing potential growth drivers such as lower consumer consumption positively affecting delinquency rates and the ramp-up of new products like Home Equity Lines of Credit (HELOC) and Auto loans.
In the same vein, BofA Securities raised its price target for Upstart from $23 to $27, maintaining an Underperform rating, following the company's second-quarter results that exceeded expectations. Upstart's loan volume and revenue growth are accelerating, a trend expected to continue as the macroeconomic environment improves. The company anticipates total revenues of approximately $150 million for Q3 2024 and projects positive adjusted EBITDA in Q4 2024.
Furthermore, Upstart has formed a partnership with AMOCO Federal Credit Union to offer AI-driven loans, enhancing its lending capabilities. Despite a 9% year-over-year decline in fee revenue to $131 million, Upstart saw a 31% increase in loan transaction volume. These are notable developments in Upstart's ongoing efforts to refine its AI-driven lending platform and strategic move towards a more sustainable and diversified funding structure.
InvestingPro Insights
The recent partnership between Upstart and Blue Owl Capital aligns with Upstart's dynamic market position, as reflected in recent InvestingPro data. Upstart's market capitalization stands at $3.8 billion, indicating significant investor interest in the company's AI-driven lending platform.
InvestingPro Tips highlight Upstart's volatile stock performance, with a strong return of 27.84% over the last month and an impressive 73.37% over the last three months. This volatility aligns with the company's innovative approach to lending and its potential for rapid growth in the fintech sector.
Despite the recent positive stock performance, it's worth noting that Upstart is not currently profitable, with a negative P/E ratio of -18.87 for the last twelve months as of Q2 2023. However, the company's liquid assets exceed short-term obligations, suggesting financial stability as it pursues growth opportunities like the Blue Owl partnership.
The partnership with Blue Owl could potentially address Upstart's profitability challenges. With a revenue of $575.96 million in the last twelve months and a high gross profit margin of 73.76%, Upstart demonstrates strong operational efficiency. The $2 billion purchase commitment from Blue Owl may further boost Upstart's financial metrics and market position.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 11 more InvestingPro Tips available for Upstart, providing a deeper understanding of the company's financial health and market prospects.
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