Tech-based Lenders Clobbered On Dose of Bad Economic NewsJune 29, 2015 | By: Sean Murray
How would tech-based lenders fare in a slumping market? Not very well apparently…
OnDeck (ONDK) and Lending Club (LC) set new record lows earlier today amid bad news coming out of Greece and Puerto Rico. OnDeck is down almost 43% from its IPO price and down 61% from its all time high. It was down more than 8% today even though the Dow was only down 2%.
$ONDK was unaware that it focused on Greek loans…. interesting 8.6% drop.
— Mark Holder (@StoneFoxCapital) Jun. 29 at 05:48 PM
The downward trend was dissected in a post that was published just hours before today’s further fall.
Meanwhile Lending Club is in new territory, down 3% from its IPO price and down 50% from its high. So what are investors saying about this?
$LC hmm i really dunno what to say about this…
— mike pham (@mincogneto) Jun. 29 at 05:30 PM
That’s kind of the overall gut feeling. Many feel this company is being unfairly dragged down and yet it continues to fall. A mounting campaign by the Puerto Rican government to declare bankruptcy and a Greek debt disaster clobbered everything today including Lending Club. One tweeter came up with a great idea last week, bail out Greece with a loan from Lending Club…
— World First USA (@WorldFirstUS) June 22, 2015
Last week no one was even talking about Puerto Rico. Now all of the sudden they’re in a “death spiral.”
Watch the death spiral coverage on CNN
The market’s tech lending darlings might’ve gotten pummeled like everyone else but the ease with which they drop should probably be a warning sign. Neither offshore dilemma stands to have any impact on their businesses. So what would happen if a relevant issue were to arise such as a domestic disaster, a sudden rise in unemployment, a recession, a financial crisis, skyrocketing fuel prices, a steep increase in the fed funds rate, or even something no one dares talk about like a legal ruling that could jeopardize the entire bank charter model?
It’s quite possible that both companies haven’t bottomed out just yet….
Note: I have no equity positions in either company. I do own Lending Club notes however.
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.