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

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 roughly-7% shareholding.

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 stake sale, which is likely to be concluded within weeks but which may not ultimately comprise the asset manager’s entire shareholding.

Starling Bank’s existing 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 comes as a surprise, even against the backdrop of a rout in technology company share prices since then.

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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 near-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 unicorns such as the payments business Wise and 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 impact.

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 the current 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 major high street lenders.

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

Starling’s most recent funding round, which was announced in April, saw it raise £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 other major scale-ups 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 SME 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 COVID loans.

Jupiter, one of Britain’s best-known asset managers, has seen its shares slump during the last year.

On Thursday, it told staff it was looking to cut its workforce by close to 15%.

It is in the process of changing its chief executive, with Andrew Formica to be replaced shortly by Matthew Beesley.

Neither Jupiter nor Starling would comment.

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