Jupiter to sell £100m Starling Bank stake at big discount to valuation

The London-listed asset manager Jupiter is finalising the sale of a stake in Starling Bank at a big discount to its most recent valuation of £2.5bn.

Sky News has learnt that Jupiter Fund Management is in advanced talks with several existing investors in the digital lender about offloading a shareholding of about 7%.

The discussions have settled on a valuation for Starling Bank of about £1.5bn, according to people close to the situation.

Jupiter is expected to generate just over £100m from the sale, which is likely to be concluded within weeks but which may not ultimately comprise the asset manager’s entire shareholding.

Starling Bank’s investors include the Qatar Investment Authority, a division of Goldman Sachs and Fidelity, the global asset management giant.

One source said that Goldman was among the shareholders looking to increase its stake as part of the deal.

The size of the discount to Starling Bank’s valuation in April, when it announced a new funding injection, may come as a surprise, even against the backdrop of a rout in technology company share prices since then.

Sky News revealed several weeks ago that Jupiter, which owns close to 10% of Starling’s equity in its UK Mid Cap Fund and elsewhere across its funds portfolio, had instructed bankers at Citi to find buyers for the holding.

The sale does not include the almost 10% Starling shareholding owned by Chrysalis, the London-listed investment trust overseen by Jupiter fund managers Richard Watts and Nick Williamson.

Chrysalis’s shares have been hurt by the global rout in the valuations of technology companies, with firms such as the payments business Wise and the buy-now-pay-later specialist Klarna held by it.

Like industry peers, Jupiter’s UK Mid Cap Fund has a 10% ceiling on the value of its unlisted holdings – which Starling’s rising valuation has at times threatened to hit.

The fund’s other private holding is a modest stake in Secret Escapes, an online travel company which has a much lower valuation than Starling.

Sources close to the bank, which was established by Anne Boden in 2014, said its profitability was expected to grow significantly during a period of rising interest rates.

One insider said it may report a profit of more than £200m for this financial year.

In its most recent financial results, Starling pointed to an industry-leading return on tangible equity (ROTE) of 17.5%, against an average of 11% for big high-street banks.

It is said to be working on a number of substantial contracts for its software-as-a-service subsidiary Engine, and Ms Boden and Engine executives travelled to Australia recently to negotiate deals.

In Starling’s most recent funding round, which was announced in April, it raised £130.5m at a pre-money valuation of £2.5bn.

It has been one of the big winners to date from Britain’s fintech boom, with others in the sector including Monzo, Oaknorth and Revolut.

Since launching its app in 2017, it has opened nearly 3m accounts, including more than 450,000 small and medium size business accounts, giving Starling a 7.5% share of the UK small business banking market.

It has, however, become embroiled in a war of words with former Treasury minister Lord Agnew about its deployment of taxpayer-backed coronavirus loans.

Share in Jupiter, one of Britain’s best-known asset managers, have fallen in the past year.

On Thursday, it told staff it was looking to cut its workforce by almost 15%, and Andrew Formica, its chief executive, is soon to be replaced by Matthew Beesley.

Neither Jupiter nor Starling would comment.