Prosper Might Want to Sell. But Who Wants to Buy?
Keynote Presentation by Ron Suber of Prosper at the LendIt USA 2016 conference in San Francisco, California, USA on April 11, 2016. (photo by Gabe Palacio)Has the atmosphere for the industry changed enough for Prosper to consider selling? It might be.
The beleaguered online lender is in talks with JP Morgan Chase and Financial Technology Partners to explore “strategic options,” implying a stake sale, according to Reuters.
The company is in pursuit of capital to fund its loans while trying to keep its investors happy. For that purpose, Prosper increased rates on its riskier borrowers by 0.29 percentage points this week. A move the company suggests is “appropriate and makes the risk-reward tradeoff of investing in newly originated loans at least as attractive as purchasing ABS products backed by loans through Prosper in the secondary market.” In February, Prosper raised rates by 1.4 percentage points, the same time it increased its loss estimates for investors.
This second increase, according to its new chief risk officer, Brad Pennington is a “direct result of forward looking credit market” and with the possible Fed rate hike already priced in. This move from the San Francisco-based lender follows a 28 percent cut in its taskforce, shutting down its Utah office and letting go of former risk officer and CEO Aaron Vamut foregoing a year’s salary.
The lender also lost a securitization deal with Citi in April as investors started demanding more yield from Prosper bonds. “When we don’t have alignment with our investors, when groups sell our loans into the market no matter what, if the market’s not ready, it’s not good,” Prosper’s president Ron Suber said at LendIt.
With great prosperity comes….?Last modified: May 27, 2016
Srividya's work has appeared in publications like Money magazine, Advertising Age, FirstPost and The Economic Times. She has also dabbled in business intelligence solutions, and holds a Masters degree in Business and Economic Reporting from NYU.