The Prospa Group Ltd (ASX: PGL) share price has started the week on a very negative note.
In morning trade the online lender's shares are down 28% to a 52-week low of $2.79.
This means its shares are now trading notably lower than its IPO price of $3.78.
Why is the Prospa share price crashing lower?
This morning Prospa released an update to its 2019 calendar year prospectus forecast.
According to the release, the company expects calendar year 2019 originations to be above its prospectus forecast at $574.5 million. This will be an increase of 32% on the prior corresponding period and 2.7% ahead of its prospectus forecast.
However, revenue is expected to fall short of expectations. Management expects this to be $143.8 million for the 12 months. This will be an increase of 16% on the prior corresponding period but 8% lower than forecast.
Management explained that the variance is largely due to the premiumisation strategy exceeding its forecast.
It said: "While we continue to grow our lending to all credit grades, we are seeing increased appetite for our solutions from premium credit quality customers who pay lower interest rates over longer terms."
At the contribution margin level, the revenue shortfall is expected to be partly offset by reductions in loan impairment expense and funding costs.
However, this is not enough to stop its EBITDA from falling well short of expectations.
A combination of higher than planned marketing costs and lower revenue means that pro forma EBITDA is expected to come in at $4 million. This is over 62% lower than its prospectus forecast of $10.6 million.
Management commentary.
Greg Moshal, co-founder and joint CEO of Prospa, said: "Our business continues to grow and evolve. While we are experiencing some short term impacts on our forecasts, we're confident we have the right growth strategies to deliver long term shareholder value and solve the funding challenges of small business owners across Australia and New Zealand."
"Originations are growing. Portfolio premiumisation means a higher quality loan book and lower rates and longer average terms for our customers. Early loss indicators continue to improve and we expect to continue to invest in new products, sales and marketing," he added.
