Articles by deBanked Staff
Lending Club Originated $3.3B in Loans in Q3
November 5, 2019
Lending Club originated $3.3B in loans in q3 and reported a minor net loss of $400,000. That loss was a $22.4M improvement over the same period last year, mainly due to an increase in “net revenue” and a decrease in class action and regulatory litigation expense. One of those class action lawsuits against them was dismissed on October 31.
Lending Club is the number one provider of personal loans in the country and is continuing to grow their marketshare, CEO Scott Sanborn said during the earnings call. One analyst asked if their continued lead on that could be due to the market’s declining emphasis on growth as a performance metric. Sanborn responded by saying that the competition had not let up at all on marketing and that direct mail marketing and competition is still at operating at an extremely high level.
Canadian Lenders Summit To Take Place on Nov 20, 2019 in Toronto
November 2, 2019The annual Canadian Lenders Summit produced by the Canadian Lenders Association will take place on November 20th in Toronto. Registrants can use promo code: debanked40 for 40% off the ticket price.
Knight Capital Has Been Acquired
November 1, 2019
Publicly-traded Ready Capital Corporation has acquired 100% of Knight Capital LLC. The total sales price was undisclosed but it consisted of cash and 658,771 common shares of Ready Capital stock. A share currently trades at $15.83, valuing the stock portion in excess of $10 million.
More details may emerge when Ready Capital publishes quarterly earnings next week.
“The acquisition of Knight Capital expands Ready Capital’s product offering to small businesses and does so on a platform that has achieved scale,” said Tom Capasse, Ready Capital’s Chairman and Chief Executive Officer, in a public statement. “Furthermore, the addition of Knight Capital will allow us to leverage its proprietary technology to further increase the efficiency of Ready Capital’s lending platform, enhance our borrowers’ experience and expand existing customer acquisition channels.”
Ready Capital, a multi-strategy real estate finance company, is better known by its management company, Waterfall Asset Management, LLC. Waterfall has previously provided credit facilities to companies like OnDeck, Fundation, and UK-based Lendable.
Ready Capital is headquartered in New York City and employs 400 lending professionals nationwide.
Direct Lending Investments’ Ability to Collect From Largest Debtor Looks Uncertain
October 30, 2019
When Direct Lending Investments (DLI), one of the largest online lending hedge funds, went bust, many were surprised to learn that the fund had discreetly gambled heavily in the international telecom market.
At present, a company called VOIP Guardian Partners I owes DLI $203 million. There’s a problem with recovery in that VOIP declared Chapter 7 bankruptcy this past March with little hope to repay because it itself re-loaned out DLI’s funds to telecom companies around the world and were supposedly never paid back.
VOIP is wholly owned by an individual named Rodney Omanoff, a former Hollywood talent agent. There is currently a criminal investigation into Omanoff for money laundering and “other criminal claims,” DLI’s receiver stated in a recent October report. Tens of millions of dollars potentially recoverable by DLI from VOIP are currently in the custody of The Netherlands while the investigation is being conducted.
Meanwhile, deBanked previously determined that VOIP had made bad loans of $158 million to companies purportedly in Hong Kong and United Arab Emirates, funds that came from DLI. The websites for both companies, Telacme Ltd. and Najd Technologies, Ltd, have gone offline.
The bizarre telecom investments in what was perceived to be a hedge fund focused almost entirely on the US online lending market, are not alone. DLI recently revealed that it also loaned millions to a company that put up the mineral rights for 6 oil and gas wells as collateral. It also loaned more than $25 million against a distressed commercial real estate property and a note backed by a VC investment in a cloud-based billing service company.
DLI’s receiver is not confident that it will collect the par amount of receivables on its books.
“Without providing individualized loan/portfolio assessments, the Receiver’s general assessment as of the date of this Report is that recoveries on the remaining loan/investment portfolio are likely to be far less than the $672.5 million in par value stated on the receivership books and records as of September 30, 2019. In fact, in connection with the filing of the 2018 tax returns the Receiver recorded a write down for tax purposes in the approximate amount of 40% of the par value of assets at December 31, 2018.”
Separately, the receiver wrote that most of DLI’s outstanding loan and investment portfolios are in “some form of financial distress or subject to disputes that may affect the timing and extent of recoveries on those portfolios.” It has attempted to keep the identity of those investments confidential so as not to cause any outside interference in those companies’ ability to repay.
Shopify Capital Originated $141M Of Loans And MCAs In Q3, Says It’s a Meaningful Part Of The Shopify Business
October 29, 2019
Shopify Capital, Shopify’s small business funding division, originated $141 million in loans and merchant cash advances last quarter, an 85% increase over Q3 last year.
The company has now cumulatively originated $768.9M since it began funding in April 2016.
On the earnings call, Shopify COO Harley Finkelstein commented on the company’s recent initiative to fund non-Shopify payment merchants by saying that “while it’s still early, we’re seeing strong adoption from those merchants.”
“We started Shopify Capital to help solve another playing field for entrepreneurs, access to capital to grow their businesses,” he explained. “This is especially true as merchants gear up for their busiest selling season of the year.”
When asked about how funding would play a role in the company’s long term expansion and retention plans, Finkelstein said the following:
[P]art of this is making sure that we have merchants in the entirety of their journey to success, certainly things like having additional cash for things like inventory and marketing are very important to them. And there’s not too many place to get that with capital. So we think we’re helping merchants by doing this. It also serves of course as a way to retain merchants because we’re not only now their e-commerce platform or the point sale provider or the payments provider, we’re also now in some cases playing the role of their capital provider.
So this is a meaningful part of our business, and it keeps growing, and it’s certainly something we’re very proud of. And in terms of managing the risk, it’s something we keep a close eye on. We do a ton of trade forecasting and ensuring that we look at the data to update our models as we see trends changing. That being said, it’s important to remember that most of the capital that we put out there is insured by our partner EDC.
So we think that we continue to grow the capital business at the same time manage the risk and so we’re not doing anything that is outside of that loss ratio and risk exposure comfort zone that we think we have right now.
Shopify CEO Tobi Lutke later added how their Capital division adds to their Gross Merchandise Value (GMV) because merchants use funds to build their businesses.”What happens is a lot more businesses, that otherwise would not have access to loans get them and therefore actually continue building their business.”
Attorney Pleads Guilty In 1 Global Capital Securities Fraud Mess
October 25, 2019
Jan Douglas Atlas, a Florida attorney that was arrested last month for his role in the 1 Global Capital debacle, entered a plea of guilty on Wednesday to 1 count of securities fraud. 74-year-old Atlas also agreed to be disbarred.
The charges stem from his willingness to sign an opinion letter that claimed investment opportunities being offered by 1 Global were not securities when he knew that they actually were.
1 Global collapsed last year amid investigations by the SEC and US Attorney’s office and the discovery of a massive discrepancy in the company’s accounting records. Atlas is the 2nd person to be criminally convicted. 1 Global’s chairman consented to judgment with the SEC but has not been criminally charged. Court records indicate he has already satisfied the vast majority of the SEC’s judgment.
The set of facts established by prosecutors and Atlas in his guilty plea suggest that additional individuals could still be criminally charged.
OnDeck Repurchased 3.2M Shares, Reports $8.7M Q3 Profit
October 24, 2019
OnDeck announced this morning that it has repurchased 3.2M of its own shares for $11M since making its buyback announcement on July 29th. The company intends to repurchase another $39M worth.
OnDeck was profitable in Q3, reporting a net income of $8.7M on originations of $629M. Although that was an increase over the previous quarter, the year-over-year decline was said to be a reflection of “tightening underwriting criteria and market dynamics.”
The average term loan was for $56,000 with an average maturity of 13 months. The company’s line of credit program is growing and now accounts for 21% of the company’s total loans and finance receivables at quarter-end, up 15% from last year.
“OnDeck expects the current operating environment to extend into 2020 with increased profitability,” their quarterly report said.
LendIt China 2019 is Canceled
October 23, 2019
LendIt Fintech has officially announced that there will be no conference in China this year after 3 long years in the country. A blog post written by LendIt Fintech co-founder Peter Renton explained that calamitous events engulfing the peer-to-peer lending industry there, namely the abundance of fraud, and the government’s waning tolerance, has led them to believe that no lending companies will be interested in speaking, sponsoring or even attending this year.
“We will regroup in 2020 and hopefully will be able to bring our unique event back to China,” Renton wrote.
The decision only applies to their Lang Di Fintech China event. Their US event is scheduled to take place in New York this year on May 13-14 at the Javits Center. That event will be immediately followed by deBanked’s Broker Fair 2020 at the brand new Convene at Brookfield Place on 225 Liberty Street in New York on May 17-18.
