AI-based FinTech Upstart Sees First Insider Purchase Since IPO

Insider trades can give investors a more complete view of activity within the world’s publicly-listed companies. No one has more information in relation to a company’s prospects than its executives and directors.

In this report, we are going to highlight an interesting insider purchase at Upstart Holdings Inc (UPST:US). Upstart is a FinTech company that offers an artificial intelligence-based lending platform. Using its platform, banks and credit unions can provide loans using non-traditional lending criteria. The company is listed on the Nasdaq and currently has a market capitalization of around $2.05 billion. 

Insider Buying at Upstart

2iQ’s insider transaction data shows that on May 15, Upstart board member Kerry Whorton Cooper purchased 2,000 UPST shares at a price of $19.93 per share. This trade cost the insider around $40,000 and increased her indirect holding to 5,917 shares and total holding to 8,126 shares.

First Insider Purchase Since IPO

This insider purchase is not large by US standards. However, it’s notable because it represents the first purchase from an insider at Upstart since the company’s Initial Public Offering (IPO) in late 2020.

It’s also notable because it has increased the size of Ms. Whorton’s holding by roughly 50%. The fact that the insider has boosted her stake by such a large percentage suggests that she is confident the stock is set to move higher.

Positive Developments

Upstart has faced its fair share of challenges over the last two years. However, recently, there have been some encouraging developments here.

On May 9, the company posted a smaller-than-expected loss for the first quarter of 2023 (-$0.47 versus the consensus forecast of -$0.81 per share). It also announced that it had secured an additional $2 billion in funding. It will receive this capital over the next 12 months, which will help the firm navigate the economic slowdown.

Then, on May 15, it was announced that alternative investment firm Castlelake LP had agreed to purchase up to $4 billion of consumer installment loans from the FinTech company.

"Through this purchase agreement, Castlelake is pleased to partner with Upstart to expand its business in response to the increasing demand for affordable credit in today's economic environment," said John Lundquist, Partner, Specialty Finance at Castlelake. "Against a backdrop of increasing economic uncertainty, Castlelake is committed to helping support Upstart's mission of unlocking mobility and opportunity for millions of US consumers," he added.

It’s worth noting that Upstart is a heavily-shorted stock. Recently though, short interest has been falling. A month ago, around 34 million shares were on loan. Today, the figure is under 26 million.

In light of all these developments, we see the insider buying here as a bullish signal.