Forbright, bank of former Democratic presidential candidate, advances after IPO

Shares of Forbright, the only bank to go public in the U.S. so far this year, ended their first day of trading on Thursday slightly above their IPO price. The bank is led by John Delaney, a businessman and former congressman from Maryland who unsuccessfully challenged Joe Biden for the Democratic presidential nomination in 2020.

Forbright shares gained 0.56% on Thursday. At their intraday high, the stock was up as much as 3%.

The bank raised $142 million in its Nasdaq IPO. It offered 7.9 million shares at $18 per share, the bottom of the marketed range of $18-20 per share. Following its first day of trading, the bank had a market capitalization of around $900 million, Reuters writes.

The company has yet to determine exactly how it will use the proceeds from the offering and reserved the right to deploy the funds in any manner it deems appropriate, according to the IPO prospectus. Any unused proceeds were expected to be invested in various capital-preservation instruments.

Investors appear to have overlooked Forbright “with all the focus on SpaceX,” Renaissance Capital Senior Strategist Matt Kennedy told Reuters. However, such overlooked offerings can sometimes turn out to be long-term winners, he suggested.

Forbright traces its roots to Congressional Bank, a small lender founded in 2003, but a new chapter began in 2020, according to the company’s IPO filings. That year, former U.S. Representative Delaney returned to business after losing the Democratic presidential primary race to Biden.

In 2021, an investor consortium that included Delaney, Centerbridge Partners, Gallatin Point Capital, and Bayview Asset Management invested $369 million in Congressional Bank and gained control of the lender. Delaney became CEO the same year and rebranded the bank as Forbright in 2022.

The capital infusion enabled the bank to broaden its range of products and services, the company said in the IPO prospectus. Reuters noted that Forbright’s assets increased from $1.9 billion in 2020 to $8.2 billion as of March 31.

Today, the bank provides middle-market lending, consumer banking, strategic advisory, and asset management services.

Middle-market businesses represent one of the largest, fastest-growing, and most economically significant segments of the U.S. economy, the company said in its IPO filings. Forbright estimates the market for lending to this segment at $10 trillion.

The company also sees significant growth potential in digital banking. According to its filings, 76% of U.S. consumers prefer digital banking services, yet such platforms account for only 10% of total deposits nationwide.

One of Forbright’s strengths is its focus on middle-market lending, IPO analyst Donovan Jones wrote in a blog post on Seeking Alpha.

The main risks are competition from both banking and nonbank financial services providers, argues Freedom Broker analyst Alem Bektemirov. The company could also face operational risks, including fraud. Freedom Broker has assigned Forbright a target price of $19 per share, the midpoint of the IPO range and only 5% above the actual offering price.

Jones also highlighted the company’s slow growth in interest income, the high sensitivity of fintech deposits to changes in interest rates, and the significant concentration of its loan portfolio in the real estate and construction sectors.