Jefferson Capital Inc.’s stock received a warm reception on Wall Street on Thursday, as investors aimed to benefit from the company’s business in collecting money from unpaid credit cards, auto loans and phone bills.
The total addressable market for these types of loans has grown rapidly as the U.S. economy slows, and struggling consumers face higher interest rates on loans.
Jefferson Capital’s stock (JCAP) opened at $19, or 26.7% above the initial public offering price of $15 a share. It has pared some gains to be up 24.7% in recent trading.
The company’s stock offering raised $150 million with lead underwriters Jefferies and Keefe, Bruyette & Woods, as it joined the ranks of publicly traded companies such as PRA Group Inc. (PRAA) and Encore Capital Group Inc. (ECPG) that specialize in addressing outstanding consumer debt.
Jefferson Capital sold 10 million shares at $15 a share, at the bottom of the expected pricing range of $15 to $17. With 64.8 million shares outstanding after the IPO, the pricing valued the company at $972.2 million.
Minneapolis-based Jefferson Capital said it ranks as the largest purchaser of nonperforming telecom receivables in the U.S. as well as the largest or second-largest purchaser of both nonperforming and insolvent auto-finance receivables and insolvent consumer receivables.
Basically, the company buys consumers’ troubled loans at a discount, then works with the consumers to have them paid back “based on their current financial circumstances.”
The cumulative estimated or reported charge-off – money that’s not expected to be paid back – on credit cards, personal loans, telecom and utility bills and student loans rose to $167.8 billion in 2024 from $115.7 billion in 2019 in the U.S., according to estimates from Jefferson Capital.
That’s a cumulative growth rate of 45.1% over five years.
“In addition to the significant market opportunity in nonperforming consumer finance receivables, there is a much larger opportunity in certain segments of performing consumer finance receivables which include higher risk performing loans and loan portfolios in runoff where we have historically deployed capital at attractive returns,” the company said.
It offers a “one-stop liquidity solution” to consumer credit issuers by buying both nonperforming and performing finance receivables, the company said.
Against this backdrop, Jefferson Capital’s net income in the first quarter nearly doubled to $64.2 million from $32.9 million in the year-ago period. Revenue grew to $154.9 million from $99.9 million in the year-ago period.
For full-year 2024, Jefferson Capital reported $128.9 million of net income on revenue of $433.3 million, up from $111.5 million of net income and revenue of $323.1 million in 2023.
Private-equity firm J.C. Flowers planned to sell 7.76 million shares of Jefferson Capital in the IPO for proceeds of about $77.6 million. It’s reducing its stake in the company to 67.5% from 81.7%.
Thomas Harding, a managing director at J.C. Flowers, John Oros, former operating partner and managing director at J.C. Flowers, and Thomas Lydon Jr., a vice president at J.C. Flowers, are all on the board of Jefferson Capital.
