Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.
Articles by Sean Murray
Heather Francis Launching New Funding Company
January 5, 2015
One of the Six Women of Alternative Finance is leaving their current position to launch their own funding company. Heather Francis, EVP of Merchant Cash Group appeared in the September/October issue of DailyFunder. A regular at the industry’s conferences and who was in many ways the face of Merchant Cash Group, Francis is moving on to start Elevate Funding.
When the news broke, deBanked asked Francis about the change. This was her response:
“So the start of the new year begins with something exciting for me as I will be leaving Merchant Cash Group to pursue heading up my own funding company. Elevate funding is still in the set up stages and will not be operational and funding until Mid February but I can assure you that with each unveiling of what we will be funding and what we will offer to the Alternative Industry as well as the business owners will help shape a new future. I enjoyed my time at Merchant Cash Group and I wish them all the best but I am excited for this new adventure and to take a lot of the ideas that have been kicking in my head for a while and see them come to fruition. I know it will be difficult and I am greatly looking forward to the challenge. In the words of a Fort Minor song : This is 10% luck, 20% skill, 15% concentrated power of will, 5% pleasure , 50% pain, and a 100% reason to remember the name… Best of luck to all in 2015!”
Elevate will be based in Gainesville, FL.
Despite FinTech Disruptions, Many Thing Stay The Same
January 5, 2015
2014 was an unbelievable year!
I kicked off last year by opening an account with Lending Club so that I could understand their product. Today I have tens of thousands of dollars invested on their platform and picking up new loans has become part of my daily routine. You could say I’m not surprised they went public a few weeks ago.
I also launched the industry’s first trade publication and ran it as both publisher and chief editor. We produced 6 issues and distributed more than 20,000 print copies combined. Unfortunately the publication will not be continuing further. It is wild to think that it both started and concluded in 2014 as the magazine had a cult-like following.
7 conferences in 4 cities. Las Vegas (twice), San Francisco, New Orleans, and here in New York. I spoke at two of them. Hoping for at least 1 Miami conference this year. Please??? It’s so cold here right now.
OnDeck Capital took a lot of flak in 2014 from both industry insiders and the media. They shrugged it all off and went public on December 17th. Considering they’ve operated on the fringe of the merchant cash advance industry for so long, it was one of those things you had to see to believe. I didn’t get inside the building but I saw the IPO was real from the outside.
I started off 2014 not knowing what a Bitcoin was. Now I have a copy of the entire blockchain, operate a full node (don’t worry I have port 8333 open), have 10 dedicated mining devices running 24/7, have made purchases with bitcoin, conducted countless transfers, and just finished coding a working prototype application using Coinbase’s API. And when I realized that bitcointalk.org and my cryptography books weren’t enough to satisfy my appetite, I found myself talking about bitcoin on IRC; #bitcoin and #bitcoin-pricetalk on irc.freenode.net. I also know who Satoshi Nakamoto really is now too but he made me promise not to tell anyone.
I rebranded Merchant Processing Resource to deBanked, retiring a name I’ve used for 4 years.
I interviewed former Congressman Barney Frank, one of the two architects of the Dodd-Frank Wall Street Reform and Consumer Protection Act (it was only a few questions).
I got asked by a credible movie producer if I would help him on a storyline for a script about Wall Street and the alternative business lending industry. Don’t worry I turned it down!
I jumped on the payment disruption bandwagon and used Square to process credit card transactions all year. You should know that I previously did merchant account sales. I could’ve boarded my own account and set my own fees but I went with Square anyway.
I finally got set up to syndicate on merchant cash advances.
I ran my first 5k in Central Park.
I moved to a different part of Manhattan.
Of course a whole lot more happened. It was a roller coaster year which leads me to believe that 2015 will be impossible to predict. There’s a lot more room to grow in FinTech but it might be time for fresh ideas. Everyone and their mom built an online lending marketplace platform in 2014.
Similarly, it’s also a tough time to become a loan broker or MCA ISO especially if you’re undercapitalized. The easy profit ship has sailed. Press 1s and UCCs aren’t winning business models, at least not ones that will invite outside capital or ensure survival long term.
2014 changed finance but in many ways it stayed the same.
It still takes 2-4 days to confirm an ACH didn’t reject! This is annoying all around. If I add funds to Lending Club on a Monday, it’s not accessible until Friday evening. If you debit a merchant on Monday, you won’t really know if you have it until a few days later. Believe it or not I actually mailed out more checks in 2014 than in any other year of my life. The ACH system appears to be fine until you use something that is far more advanced, something I will probably write about over the next month. Instantaneous payments, low transaction fees, no bank involvement. Yeah, it’s time for ACH to go away…
And with banks, well… I have opened business bank accounts over the last few years with 3 different banks. The one I opened in 2014 required a two hour in-person interview, a process that involved filling out forms by hand and being threatened that the government would shut everything down in a heartbeat if they found out that I so much as breathed wrong on an ATM. It was a repeat of prior account opening experiences. Although I’ve never had an account closed for doing anything wrong (because I’m not actually doing anything wrong), it is easy to see how much regulatory pressure banks are under. Swiping your debit card upside down could cause the entire bank to get an Operation Choke Point subpoena. They want your business but they’re scared to death of anything you might do with a bank account.
All the major peer-to-peer platforms of 2014 became centralized. Lending Club and Prosper don’t even fall in the p2p category anymore. The market trend has been to create a platform designed for the little guys and then hand it over to a bank or institutional money to do all the funding. In some ways it’s easier to deal with a handful of big players instead of thousands or millions of retail investors. But with the regulatory environment uncertain on so many new investment products, it’s probably also safer to deal with institutional investors, lest the regulators claim they violated a consumer protection law they thought up this morning.
Banks continue to be the biggest obstacle to innovation because at the end of the day, all payments flow through them. How can one deBank and truly disrupt?
Hopefully we’ll find out in 2015. Happy belated New Year.
With OnDeck IPO, Strangers Walk Among Us
December 18, 2014The future isn’t ours to make anymore. Not ours alone anyway. Last week the industry was a group of insiders. Today the outsiders walk among us.
$ONDK looking good, but surely this will fall by tomorrow.
— Nealio (@IpoBandwagonTagAlong) Dec. 17 at 11:07 AM
I don’t know who IpoBandWagonTagAlong is but he’s now an influencer in the industry. Almost 13 million shares of OnDeck Capital traded today, its very first day on the NYSE.
$ondk new ipo watching this..seems similar business to $lc
— kunal desai (@kunal00) Dec. 17 at 01:59 PM
It hurts to see “seems similar business to [Lending Club]” as the information being gleaned about OnDeck. I could spend an entire week contrasting the differences but it doesn’t matter anymore. Opinions about OnDeck and the industry they’re part of are about to be formed in tweet-sized pieces at rapid fire pace. Anything longer and the opportunity presenting itself on a trade might pass. Wild.
If you’re in the merchant cash advance business, you’re about to learn that describing the purchase of future sales in anything more than 140 characters is going to work against you. You will inevitably be asked if you do what OnDeck does and you better be concise.
Exactly 140:
“We provide working capital to small businesses by leveraging their future sales. It’s not a loan but it is in some ways similar to OnDeck :)”
Or you could simplify it further and just write:
“Seems similar”
Proud to have OnDeck join the NYSE’s community of the world’s leading, most-recognized companies (NYSE: $ONDK ) pic.twitter.com/ReozilWjbR
— NYSE (@nyse) December 17, 2014
The most striking thing I experienced on opening day was watching so many OnDeck bears transform into OnDeck bulls. Lots of buy orders were placed by those that have been chugging hater-ade for years.
I think that despite reservations with their business model, there was a desire to touch the company in some way, to feel like they were a part of the industry’s milestone. I totally get it. But that brings up an interesting question, how much of the stock can you touch until you start to hold some sway?
I mean shareholders are owners right?
Theoretically, could a terminated ISO buy up shares and then start making demands about re-establishing a partnership? What is the protocol here? Can OnDeck’s ISOs buy OnDeck? Or OnDeck’s competitors? I don’t mean a controlling stake but enough to make some noise. Imagine OnDeck being a funder for the ISOs by the ISOs! If a huge ISO is terminated, does that have to be announced to the public at the same time that the ISO community finds out?
This is a very gossipy industry and coincidentally, I run practically all the industry gossip websites so people like me want to know.
What if a merchant owns shares of the company it is applying to? Is that a positive underwriting data point?
With an office close to the New York Stock Exchange, I was able to at least snap off a few pics of the big banner displayed outside.
And if you’re wondering if I bought stock in OnDeck, I did not. I didn’t buy Lending Club either. It has nothing to do with how I feel about either company.
According to Crain’s, OnDeck’s “$1.32 billion market cap at its debut was the biggest for a venture capital-backed New York City tech company since 1999.” The stock exploded upward almost 40% from its open today. A lot of folks in the industry bought in and the rest is history.
Congratulations OnDeck Capital.
Confessions of a Bitcoin Miner
December 18, 2014If you’re even vaguely familiar with Bitcoin, you’ve probably heard that you can mine them. It’s one of Bitcoin’s most unfortunate pieces of jargon because it sounds like a scam. We can’t mine U.S. Dollars so there’s no frame of reference for what enthusiasts are talking about. We can mine gold and silver of course, but how the heck can one mine a digital currency? It’s clear there’s more to Bitcoin than just being a form of money and that frightens people. It certainly frightened me.
The first time I imagined bitcoin mining, I pictured sentinels from The Matrix drilling down with unrelenting intensity towards the last human city of Zion. Perhaps the humans were hoarding a vast trove of valuable bitcoins and a war was being waged to achieve digital hegemony. Like Ray in Ghostbusters, I couldn’t help it. The thought just popped in there.
The next thought was that I better stay away from Bitcoin. It was easier to take the blue pill where “the [Bitcoin] story ends, you wake up in your bed and believe whatever you want to believe.” That’s what many consumers have done in the past. And who could blame them? I liked my life without Bitcoin in it, so why mess it up?
But the maniac I am, I took the red pill and explored just how the deep the rabbit hole goes.
I mined some bitcoins and the machines didn’t kill me, at least so far. I’m mining them right now as I type this. If you’re getting excited that I’m about to tell you that I’m getting rich while you fools sit on the sidelines, you’re going to be disappointed. There is no actual mining. It’s just slang for facilitating bitcoin transactions over the Internet. Womp womp. If people weren’t sending bitcoins back and forth, then there would be nothing to facilitate and therefore nothing to mine.
To illustrate simply, I’ll start off by reminding you that Bitcoin has no central authority. There is no Visa, no banks, and no Federal Reserve to sign off on a transaction. Instead Bitcoin transactions are validated by computers connected to the Internet running free Bitcoin software.
If I have 5 bitcoins and I send 3 to you, computers all over the world running this software are processing algorithms to validate this and make them permanent in a global ledger. The computers make sure you really have those bitcoins to send and then transfers them. You can’t create a fake bitcoin or spend one you’ve already spent because the Bitcoin system will know about it.
On just a single day there are nearly one hundred thousand bitcoin transactions. That’s too much for just a few computers to handle, not to mention that the processing power required to validate them is intense. Validating transactions requires lots of processing power and utilizing processing power has a cost in electricity.
So it pays
The Bitcoin system has a built in reward system to incentivize people around the world to keep the system in order. If your computer achieves a specific milestone while facilitating transactions, you are rewarded with bitcoins. Again, don’t get excited. These milestones are extremely rare to reach and totally random (for the record it’s called solving a block). You could facilitate transactions for 200 years and never get any bitcoins back as a reward.
But while random, it’s a probability game. The faster your processing power, the better your odds of being the lucky computer to receive the reward. That’s a necessary but unfortunate component to Bitcoin because there’s a built-in arbitrage opportunity. Why be a passive facilitator when you could arm your computer with a faster processor and rig the odds in your favor? If your computer was significantly faster than the other ones on the network, you could potentially get rewarded bitcoins often enough and with enough consistency to cover both the cost of your upgraded computer and the electricity to keep it cranked up.
And with that understanding, an international arms race began for increased processing power. Up until early 2013 you could quite easily profit from being a facilitator. Those folks didn’t see themselves as facilitators anymore but as miners. It wasn’t a passive activity. It was a business, like hauling ore out of a silver mine.
Today, so many people have tricked out their processors that it’s nearly impossible to get an edge. In fact, mining often results in losses. I have experienced a net loss in actual U.S. dollars through mining even though I’ve acquired fractions of bitcoins. Net loss? whuh?!
Forget about using your desktop or laptop to mine bitcoins. That’s so 2011. Engineers went on to build special hardware chips much better than household computers that do nothing other than process calculations for bitcoin transactions. Then came small boxes of chips, then large ones…
And when everyone started buying large bitcoin processing boxes, they began to buy two or three of them…
Then a stack of them…
Then a room full…
Then a warehouse full…
And of course a lot of additional money had to be spent on cooling, ventilation, and protecting against fires.
This is where a little problem started. Once everybody was using a million dollars worth of specialized hardware for speed and was spending tens of thousands of dollars per month on electricity, the edge was constantly being neutralized. Worse, the frequency that bitcoins are awarded per day does not increase. There will only be 21 million bitcoins ever placed in circulation. They’re awarded through mining at a fixed frequency. You can try to be the recipient of each reward but the frequency of which they’re awarded doesn’t increase.
Bummer for those that have amassed nuclear arsenal sized mining operations.
But also bummer for me. This is the extent of my mining equipment.
I have three small mining chips all connected via a USB strip. The outer pieces are ASICMiner Block Erupters and between them is a Bitmain Antminer U2. They run 24/7 connected to my home laptop. I can monitor their activity through this little window on my screen:
Combined they are crunching out an average of 2.2 Giga hashes (GH/s) per second, a speed so insignificant compared to the network’s competition that I will probably die without ever receiving a reward of bitcoins.
Unless…
Join forces
There’s a trick to mining to ensure you don’t die rewardless. You can combine your processing power with other miners and leverage your chances. Then if the group’s effort yields a reward, it’ll be distributed on a prorated basis. Someone got this idea a long time ago and in today’s ultra competitive environment, it’s practically a must.
They’re called mining pools. Pools aren’t just a couple of friends, they’re nearly small cities of miners working together collaboratively. The pool I mine in (BTC Guild) has 14,000 to 16,000 users mining together at any one moment and a single user could have an entire warehouse full of mining equipment. In the last hour, the fastest user provided 1,047,666.38 GH/s worth of power to our pool. That’s 476,211x more than what I contributed and he is just 1 of 15,000 users in our pool. woah!
What’s even more wild is that BTC Guild only makes up 5% of the world’s Bitcoin mining power. And yet because I am part of that pool I am paid a prorated amount for every reward the team earns. Surprisingly, that number is not zero. Running 24/7, I am earning an average of 60,000 satoshis a month.
The exchange rate of Bitcoin is extremely volatile but at this moment 60,000 satoshis is equivalent to 19 cents. Yes, 19 cents per month!
And don’t forget that the mining chips cost money to buy and running them 24/7 runs up more than 19 cents worth of electricity used. This means Bitcoin mining isn’t about getting rich. I’m losing money mining. It’s a hobby or benefit conferred upon the digital currency system to keep it running smoothly and accurately. Well at least for me…
Remember that miner that’s out-processing me on a scale of 476,211 to 1? He’s earning about $90,000 per month. I don’t know what his expenses are to run an operation like that but I’m sure it’s not cheap. His biggest enemy is that the value of Bitcoin to the dollar has fallen pretty heavily this year. $90,000 a month in revenue could become $45,000 a month just through exchange rate risk. Those are pretty high stakes to gamble with. But it could also become $180,000!
And whether the big players like that mine or don’t is irrelevant. Whether he makes money or not doesn’t matter. Arbitrage opportunities in the facilitation of transactions is for ultra geeks with big bucks. Mining as a hobby is for regular geeks. It’ll cost some money to do but you get to contribute to a system you believe in.
As for you, the potential average currency user, mining is not really of any consequence. The facilitation of digital transactions already happens with dollars, euros, and pounds. In My Journey to Bitcoin, I explained that buying a cup of coffee with a credit card requires 8 people to get paid for the transaction. Sure the process is completely different for Bitcoin but so what? Bitcoin is unique.
The problem is the mining terminology. It should be called facilitation but that doesn’t sound sexy especially if you are trying to convince an investor to give you $1 million to take advantage of potential arbitrage opportunities on the network.
And that’s about it. The real story behind mining isn’t so scary and you won’t necessarily be at any disadvantage if you still have no idea what the hell mining is. Bitcoin is full of technical nonsense best left to geeks, but you as an actual currency user do not have to worry about a lot of it.
If you’re at all like me though, obsessively curious about how things work and excited to try them out, I’m happy to clue you into the mechanics of mining and even get into the finer details behind it.
An ASIC Block Erupter costs about $10 on Amazon or eBay. I run Ubuntu Linux as my native desktop OS at home (geeky I know) but you should be able to do it with Mac or Windows. The mining software I use is BFG Miner 3.10 and I use BTC Guild as my pool. Admittedly, I am waiting for a delivery of two more Antminer U2s (5x faster than the Erupters but just as cheap) and a delivery of two Antminer U3s (210x faster than the Erupters). I will in all likelihood not achieve a profit even with the additional equipment. And that’s okay, it’s enjoyable just messing with the gizmos.
The best way to learn about Bitcoin is to try it yourself. Hey maybe you’ll hate it, but at least it’ll be based off experience. You can buy fractions of a Bitcoin, even just a few dollars worth from Coinbase. From there you can shop online, convert them back to cash, or send them all to me. 😉
I’m not afraid to say that I mine bitcoins, even if it’s infinitesimally small amounts. What else did you expect from a guy running the deBanked website?
I put my bitcoins where my mouth is. If you’re into alternative finance too, it’s finally time you gave in and tried it.
Through OnDeck Capital, An Industry Wins
December 16, 2014
Call it merchant cash advance, non-bank business lending, or financial disintermediation. Whatever floats your boat. On December 17th an entire financial methodology will be validated, the daily repayment method. Daily payments don’t exist anywhere else in lending but ’round these parts it’s the standard. It’s what makes unbankable businesses bankable.
OnDeck is a lender. They target small businesses. The costs are high. Anyone could feasibly do those things and plenty are doing them, but only a certain segment of fintech companies utilize daily payments and most of those are merchant cash advance companies. OnDeck is a lender but like it or not their core repayment mechanism overlaps with an industry well known for being even more expensive.
Daily payments are so unique and so revolutionary that it hasn’t sunk in to the masses yet. Even the press glosses over this fine detail to instead dwell on things like APRs and social media’s role in approvals. Daily payment and daily repayment look like tech jargon, some kind of code for a backend computer process to hotwire an anomalous rate algorithm.
Daily payments mean borrowers have to make payments every single business day. It’s daily, get it? If the sun rises and it’s not Saturday or Sunday, it’s time to make a payment. I’m not saying there’s something wrong with this. I’m a proponent of this mechanism. It works for business owners that struggle to make a single lump sum payment each month and it works for lenders who need to mitigate and monitor their risk as much as possible.
I feel it’s better to know there was a problem that started yesterday than to learn there was a problem that started 29 days ago. That’s how OnDeck thinks too. And business owners can incorporate the daily deduction into their normal business operations instead of fretting to cover the balance for a big debit the day before a monthly payment is due.
This isn’t just a theoretical design that can’t function in practice. It’s been working for lenders and factors since AdvanceMe (Now CAN Capital) started doing it in 1998. The daily payment methodology has survived the Dot Com Bust and the Great Recession. It’s grown to a $3 – $5 billion a year industry. By some measures, it’s taken a hell of a long time to go this mainstream.
But it’s here. The press will call OnDeck a lender, a tech company, or a combination of both. They’re a sign of the times but they are unique in that they will show the world that daily payments have a place in the modern economy. With OnDeck leading the way, traditional lenders may consider leveraging their methodology to serve categories of risk they usually shy away from.
I’ve never heard of a business credit card that required payments to be made every day. Some might think that defeats the purpose of credit. OnDeck proves it doesn’t. And 100+ merchant cash advance companies serve as a secondary validation. Perhaps there are lenders that have considered a daily payment system previously and feared the political or legal environment was too risky. But OnDeck is making no apology about what they’re doing or how they’re doing it. They’re putting themselves on the open market, surrendering themselves to total scrutiny.
CAN Capital is gearing up to follow them, the pioneers who first experimented with daily payments 16 years ago. And while OnDeck bemoans their loan program being compared to merchant cash advance, CAN is made up of two departments, one of which is undoubtedly a merchant cash advance service provider.
And there you have it. It’s not all about algorithms or tech or using facebook activity to judge a borrower. Those are old ideas now. OnDeck smashes down the door with something completely different, something that nobody is even talking about, daily payments.
December 17th is Wednesday and just about all of OnDeck’s borrowers will be making a payment. A good many of them won’t even notice. That’s the great part about layering it in as a daily cash flow expense. There’s no worrying about it at the end of the month. If they underwrite the borrower financials well enough, it should be completely painless. That’s not always the case, but it’s the goal.
You can’t possibly understand OnDeck until you understand daily payments. With this IPO, an entire industry wins.
How to Use Bitcoin
December 8, 2014
The best way to get comfortable with bitcoin is to just try using it yourself. Even though there are many technological, mathematical and confusing layers to bitcoin, the currency aspect of it is by far the easiest to use and understand.
With that said, here’s how you can dip your toes in and become a big bitcoin kahuna:
1. Open an account on Coinbase.
2. You will need to buy/exchange bitcoins using your regular currency such as US dollars. To do this you will need to connect your bank account to Coinbase. This is what I did. Also it will ask you to enter your cell phone number for two-factor password authentication to prevent hacking.
3. Decide how many bitcoins you want to buy. I bought 1 whole BTC but you can buy fractions of 1 if it makes you feel comfortable. Choose whatever amount you want. You can always buy more or sell your bitcoins back into dollars.
4. Bitcoins will be deposited in your account. Coinbase will store them for you along with the private key to use them. You can choose to export your bitcoins but you don’t have to. I keep mine at Coinbase.
5. Shop anywhere that accepts bitcoin. I shopped at overstock.com.
6. On overstock.com, I selected the item I wanted and placed it in my shopping cart. For payment method, I selected bitcoin.
7. There are two ways you can initiate the bitcoin payment to overstock:
— A. Manually send bitcoins to the address provided. A random receiving address is created for each transaction.
— B. Use your Coinbase wallet (the option on the left. This is easiest and what you should do)
8. If you used option B above, Coinbase will automatically transfer the bitcoins to overstock.com and your order will be placed instantaneously.
All finished. You’ve officially joined the world of bitcoin!
—————–
Need to send a payment manually? It’s easy!
1. Log on to Coinbase.
2. Click “My Wallet” on the left hand side.
3. Click “Send”
4. Make sure you know the recipient’s bitcoin address. If you are making a payment to advertise here on debanked.com, this is an address I will supply you with. Some parties create a unique receiving address for each transaction but they can be reused.
5. Internet connected bitcoin miners around the world will automatically facilitate the transaction. This should take about 10 minutes at most. There is nothing you need to do other than wait for the receiving party to confirm. It is impossible for them to deny receipt of the bitcoins as all transactions are verified and public in the Bitcoin Blockchain.
All finished. You’re now a pro!
Getting in on the ONDK and LC IPO
December 4, 2014According to Investopedia, “Getting a piece of a hot IPO is very difficult, if not impossible.”
The Motley fool says:
If the bankers think a stock will soar, they earmark much of the shares for their favorite institutional clients (ones that bring in the most in commissions). In a sense, brokerages use lucrative IPOs to curry favor with big clients, to win and retain their business. When brokers aren’t so confident about the company’s prospects, they will try to sell the stock to less-favored institutional clients.
Admittedly these are generalities, not unyielding truths.
But when Lending Club mass e-mailed all their platform lenders on November 17th that they would be rewarded with a chance to get in on the IPO, people got excited. They wouldn’t just automatically get stock though, they’d be given the chance to buy it. An allocation was not guaranteed and a limit as to how much was not immediately disclosed, though it was recently revealed that platform lenders could buy up to a maximum of 350 shares.
At $10-$12 a share, that’s an opportunity to spend a max of $3,500 to $4,200 on the IPO. Getting in won’t make you a millionaire but it’s a little way for Lending Club to say thank you to all those who invest on their platform.
I got the offer and turned it down. I’m very bullish on Lending Club stock but I feel like I’m already invested enough in them as a company through platform lending to need to get even more in. For those not sure how Lending Club really works, their system is not actually peer-to-peer. Investors buy Lending Club notes that are tied to the loans they issue. You are ultimately only investing in Lending Club with every note you buy. You have no relationship or claim to the borrower.
With that being the case, my tens of thousands invested in them is enough, especially from a retail investment standpoint. But I enjoyed the proposal nonetheless because it felt like a gift for getting in on the ground floor of something huge.
I also liked telling people over the last two weeks that I could get in on the Lending Club IPO.
“You hear about Lending Club going public?” I’d ask a friend. And then brag, “Yeah, well I have a chance to get in on the IPO if I want. I could talk to my guy to try to get you in but I don’t know if I can swing it. Maybe though.”
I was pretty damn important.
Until someone told me they could get in on the OnDeck IPO today. He apparently had an inside guy and that inside guy was E*Trade, as in he could apparently get in on OnDeck’s IPO just for having an E*Trade account.
One had to wonder why any schmo with a brokerage account was being asked to buy in. It didn’t sound good for OnDeck but I let my friend have his moment. His guy could try to get me in, etc.
The mass blanket invitation to get in might appear that brokers aren’t so confident about the company’s prospects. But actually back in January of this year E*Trade forged a “retail alliance” with middle-market investment bank Jefferies LLC. A Reuter’s story said that, “E*Trade is betting that it can score points with investors by guaranteeing access to IPOs that brokerage firms normally reserve for their best customers.”
OnDeck’s underwriters include Morgan Stanley, Bank of America Merrill Lynch, JPMorgan Chase, Deutsche Bank and Jefferies. This is in line with “giving its customers access to initial public offerings and follow-on offerings underwritten by middle-market investment bank Jefferies LLC” though I haven’t confirmed the alliance is the cause of this.
Just as with Lending Club’s allocation offer, no one is guaranteed anything with OnDeck through E*Trade. There’s a required approval process which may ultimately yield nothing.
And yet it still feels a little weird, maybe because I’ve been hearing about an OnDeck IPO for years now and I just can’t grasp it’s actually happening. It’s one thing for a big banker to talk about it and another for an old college buddy, my doorman, and Jim who’s the cashier at the local hardware store ask me if I know anything about this OnDeck loan stock advance thing they heard about.
All I know is that sentiment on them is mixed but that ultimately insiders believe it’s great for the industry.
As for both of these the IPOs? I don’t know. I’m not getting in on either of them but it has nothing to do with how I feel about the companies. I can’t wait to watch this all unfold though.
Check out the 224 page OnDeck Prospectus!
Lending Club’s Site Went Down
December 3, 2014A week away from IPO day, Lending Club is undergoing a supposed unannounced mid-day prolonged “upgrade”. There is no word about it on their twitter account. As many probably know, this down time coincides with one of the day’s four normal feeding times when fresh loans are loaded onto the platform in bulk.
Are they just polishing up the old gears before IPO time or did something happen?
The 3rd revision of their S-1 registration was published two days ago.
