Atom takes valuation hit as it raises £100mn in new equity

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Fintech Atom has taken a valuation hit after raising more than £100mn from existing investors as the sector grapples with higher interest rates and weaker investor sentiment.

The digital bank raised the equity from Spanish bank BBVA, private equity firm Toscafund and London-based Infinity Investment Partners, three of its longstanding shareholders.

A person close to the company said the funding round valued the challenger bank at £362mn, down from a previously reported £435mn at the start of last year.

The valuation cut is the latest sign of how weakening investor sentiment and rising interest rates have compressed fintech valuations.

Venture capital investment has slowed as borrowing costs have risen and investors have increasingly prioritised profitability over growth. One of the highest-profile victims has been Swedish buy now, pay later company Klarna, which last year had its valuation slashed from $45bn in 2021 to $6.7bn when it raised $800mn in new equity.

Atom said the latest capital raise would allow it to grow its balance sheet and compete with high-street banks and other digital challengers in the savings, business lending and mortgage markets. Atom, which had about 224,000 customers at the end of its latest financial year in March, last year reported a pre-tax loss of £10mn.

Chief executive Mark Mullen said he expected the fundraising to be the company’s last in the private markets before it floats on the London Stock Exchange.

But he added that he did not want to be “hostage” to a target date for an upcoming public listing, with markets uneasy about geopolitics and the collapse of Silicon Valley Bank and Credit Suisse earlier this year.

The challenger bank was forced to delay its initial public offering last year because of the difficult market for IPOs. And a series of public listings have fallen short of investor expectations in recent months. Shares in London’s CAB Payments, another fintech, fell 72 per cent last week after it cut its revenue forecast just three months after listing.

Atom still had work to do in order to be “mature, stable and predictable enough to be able to live a public life”, Mullen said. “We need to lay down a series of quarterly performance updates that give investors confidence that we are in control predictable and can be dependent upon,” he said. “You can’t rush that.”

Atom launched in 2016 and was one of the first app-based banks in the UK. But it has struggled to grow as fast as some of its digital competitors.

Monzo, another digital bank with 7.5mn customers, is also in talks with investors about a fundraise, according to a person familiar with the plans.