A recently finalized merger has put lending and analytics firm Open Lending (NASDAQ:LPRO) in the headlines. It’s big news for the company and equally significant for anyone considering investing in Open Lending stock.
It’s definitely worthwhile to drill down on the particulars of the business combination. Understanding the details of the transaction can help traders decide whether they should take a position in Open Lending stock.
Also important to consider, however, is the strength and viability of the company itself. Does Open Lending, following the merger, have a strong business model? Is it in a profitable sector? Answering these questions can help traders assess the value of Open Lending today.
The Real Deal
It’s important to understand the nature of the merger. Some stock traders might notice that the stock ticker NEBU has disappeared from Wall Street. It used to represent a company called Nebula Acquisition.
Don’t be misled into thinking that a company with the name Nebula Acquisition was designed to acquire other companies. Rather, its purpose was to be acquired. Specifically, it was a special-purpose company, sponsored by private-equity firm True Wind Capital, that was destined to be bought by Open Lending.
Some commentators might disparagingly call Nebula Acquisition a blank-check company or a shell company. Call it what you will, but it certainly has served its purpose.
In the words of Open Lending’a co-founder, president and CEO John Flynn, the business combination enabled the firm to “become a publicly-listed company, trading on the NASDAQ,” which in turn “will enable us to access increased financial resources to support our future growth plans.”
Getting listed on the Nasdaq is a big deal and should, as Flynn suggests, provide Open Lending with a major capital infusion.
A Closer Look at Open Lending
Now that we’ve gotten those details out of the way, it’s a good time to consider Open Lending’s business model. After all, even with the capital infusion that comes with the Nasdaq listing, investors must still weigh the merits of the company itself.
Founded in Austin, Texas in the year 2000, Open Lending purports to provide “automated lending services to financial institutions.” That’s a tad vague, but fortunately the company provides more detail.
Its services include risk modeling, loan analytics, automated decision technology, and risk-based pricing. In other words, Open Lending could help lenders make challenging and complex “who,” “what,” “when,” and “how” decisions.
Moreover, Open Lending specializes in helping companies in the automotive-lending space make these types of lending decisions. To use fancier-sounding terminology, Open Lending considers itself a “lending enablement platform for the automotive finance market.”
Along with proprietary data, Open Lending leverages advanced “decisioning” (yes, that’s a word now) analytics in its pursuit of innovative solutions for lenders. The company’s flagship product is a risk-management program called Lenders Protection.
Providing a seemingly comprehensive and data-driven risk-management platform for automotive-market lenders has its upsides and downsides. Both the automotive and lending markets have been distressed in the wake of the novel coronavirus pandemic.
On the other hand, one could argue that the need for risk management is elevated now. That’s bullish for Open Lending, and being listed on the Nasdaq should provide some “street cred” on Wall Street.
The Bottom Line on Open Lending Stock
So finally, we’ve unraveled the mystery of the vanishing Nebula and the expanding Open Lending. Now you’re empowered, if you so choose, to put this post-merger, data-empowered “decisioning” facilitator in your portfolio by taking a position in the shares.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.