OnDeck Stock Pummeled in Run Up to Lockup Expiration

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OnDeck CapitalOnDeck (ONDK) hit a new low on Tuesday, bottoming out at $13.94 in intraday trading. It closed at $14.03. Absent any recent company news, the trend downward was likely a side effect of downward pressure on Lending Club (LC) as their lockup period expired. Lending Club closed at $16.97 near its all time low.

The OnDeck drop may have also been caused by the recent story that appeared in Barrons that labeled the company and the industry they operate in, risky, saturated, and overpriced.

On Deck is a different business. Its profits come from using its own balance sheet to make risky, high-interest rate loans to small businesses. With rivals as large as Goldman Sachs gathering around these companies’ shallow high-tech moats, the competition for quality borrowers will make it tougher for On Deck to keep growing loan originations near a triple-digit pace without loosening underwriting standards. Even in today’s benign conditions, On Deck charges off more than 12% of its loans annually, while its yields on those risky loans have declined for nine straight quarters. It’s a subprime lender in dot-com clothing.

Barrons, 6/6/15

Barrons laid out the case that OnDeck is a lender. OnDeck has always taken the position that they are a tech company. The conflicting market perceptions have made their stock price very chaotic.

OnDeck’s lockup period expires on June 15th.

Last modified: June 10, 2015
Sean Murray

Category: Business Lending, merchant cash advance

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