P2P Forum

Lending Club Discussion => Investors - LC => Topic started by: brycemason on August 26, 2014, 11:00:00 PM

Title: LendingClub Files S-1 with SEC
Post by: brycemason on August 26, 2014, 11:00:00 PM
Hot off the press, LendingClub filed their S-1 today. You can read the document at the SEC EDGAR tool. Update this thread with any interesting tidbits!

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001409970&owner=include&count=40
Title: LendingClub Files S-1 with SEC
Post by: Half Right on August 26, 2014, 11:00:00 PM

LendingClub files for $500M IPO

    Top P2P lending platform LendingClub has filed for a $500M IPO. No symbol has been proposed yet. The underwriters are Goldman, Morgan Stanley, Citi, Stifel, BMO, Allen & Co., William Blair, and Wells Fargo. (prospectus)
    LendingClub had 1H14 revenue of $87.3M (+135% Y/Y), and a net loss of $16.5M. Sales/marketing spend totaled $39.8M, and origination/servicing costs $15.7M.
    1H14 Loan originations totaled $1.8B (+125% Y/Y), with contribution margin coming in at 41.8% (+70 bps Y/Y). The company had $2.33B in loans on its balance sheet as of June 30.
    LendingClub was valued at $3.75B in a funding round that took place earlier this year. The FT has reported the company is aiming for a ~$5B IPO valuation.
Title: LendingClub Files S-1 with SEC
Post by: Randawl on August 26, 2014, 11:00:00 PM
Outstanding principal balance of loans at the end of periods indicated that were issued to the fractional pool.

March 31, 2012:  73.56%
December 31, 2012:  49.27%
December 31, 2013:  30.36%
June 30, 2014:  26.35%


Between December 31, 2013, and June 30, 2014, percentage of new issues to respective parties:

Fractional retail:  17.89%
Certificates:  28.75%
Whole loans:  53.36%
LC financed:  0.05%

Derived from data on page 52.



I had read about the Springstone acquisition, but had not heard about all of these details:

Springstone Acquisition

In April 2014, we acquired Springstone, which offers education and patient financing options. Springstone utilizes two issuing banks and a network of providers. Springstone facilitates two loan products:

  •   An installment loan with amounts ranging from $2,000 to $40,000, terms from 24 to 84 months, fixed rates from 3.99% to 17.99%, fixed monthly payments and no prepayment penalties. 

  •   A deferred interest loan with amounts ranging from $499 to $25,000 that provides for no interest if the balance is paid in full during the promotional period, which can be six, 12, 18 or 24 months. If the loan is not paid in full during the promotional period, interest is imposed from the issuance date at variable rate based upon the prime rate. There is no prepayment penalty and borrowers have the flexibility to pay as much or as little, subject to applicable minimums, of the outstanding balance per month during the promotional period as they chose. 

Currently, each of Springstone’s issuing banks originates, holds and services each issued loan. For its role in loan facilitation, Springstone earns transaction fees paid by the issuing bank and service provider at the time of origination, which averaged 4.9% of the initial loan balance in 2013. We plan to incorporate these education and patient financing products into our platform over time.


Springstone's balance sheets and such are also included.  I haven't pored over that yet.
Title: LendingClub Files S-1 with SEC
Post by: LoanWolf on August 26, 2014, 11:00:00 PM
Randawl, nice spotting of the current state of loan distributions, dangling between column 3 and column 4 of page 52.

I'm confused though - are certificates, which make up 44% of current principal outstanding, just another way of packaging loans (whole or fractional) to institutional investors? What are certificates?
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 26, 2014, 11:00:00 PM
I am guessing that certificates are issued to the LC Advisor Funds and therefore may also be considered Institutional for your purposes
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 26, 2014, 11:00:00 PM
Perhaps it is to that fund and others, because it's a large share of the volume.

So the retail investor - whether through automated, manual, or API access, is currently getting a slowly shrinking pct of a rapidly growing pie.  Still growing in absolute terms, but the IPO will bring in more retail investors too, so more competition for whatever slice of the loan volume one is seeking.
Title: LendingClub Files S-1 with SEC
Post by: Fred on August 26, 2014, 11:00:00 PM
from: Randawl on August 27, 2014, 02:40:16 PM
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 26, 2014, 11:00:00 PM
I believe that Randawl derived this by subtracting the cumulative loan volume from last December from the cumulative numbers for June, for each category, and then dividing those by the total volume for that time period.  So it represents the breakdown for the new loan volume for the first half of this year.
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 26, 2014, 11:00:00 PM
from: LoanWolf on August 27, 2014, 06:16:16 PM
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 26, 2014, 11:00:00 PM
You're right, I stand corrected.  Any definitive answer to what class of loans Certificates represent in this table, anyone?  They are the largest category at the end of June.

Notes         $ 880.8
Certificates  1,481.1
Whole loans     980.7
LC financed       0.5
Title: LendingClub Files S-1 with SEC
Post by: Peter on August 26, 2014, 11:00:00 PM
from: LoanWolf on August 27, 2014, 06:59:09 PM
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 26, 2014, 11:00:00 PM
from: Fred on August 27, 2014, 06:35:13 PM
Title: LendingClub Files S-1 with SEC
Post by: lascott on August 26, 2014, 11:00:00 PM
from: Peter on August 27, 2014, 07:15:46 PM
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 27, 2014, 11:00:00 PM
I might have missed this, but does anyone know how big of LC value is the $500M? 20%?
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 27, 2014, 11:00:00 PM
http://www.bloombergview.com/articles/2014-08-27/lending-club-can-be-a-better-bank-than-the-banks

The Bloomberg article is more witty and eye-opening, IMO.
Title: LendingClub Files S-1 with SEC
Post by: DanB on August 27, 2014, 11:00:00 PM
Quote"> from: Fred on August 28, 2014, 01:49:00 AM
Title: LendingClub Files S-1 with SEC
Post by: Fred93 on August 27, 2014, 11:00:00 PM
Quote"> from: Fred on August 28, 2014, 01:49:00 AM
Title: LendingClub Files S-1 with SEC
Post by: rawraw on August 27, 2014, 11:00:00 PM
Quote"> from: Fred on August 28, 2014, 01:59:48 AM
Title: LendingClub Files S-1 with SEC
Post by: turing on August 27, 2014, 11:00:00 PM
They filed S-1, which puts their IPO around beginning or middle of October.

On average IPO's take take place about 30-45 days from S-1 file date, but can take quite a bit longer in some cases.
http://usequities.nyx.com/ipo-center/recent-ipo

Some at this link took 180 days or more (Catalent or Ryerson).  One even took several years.
Title: LendingClub Files S-1 with SEC
Post by: cfb on August 28, 2014, 11:00:00 PM
The other part that bears consideration is that this means that many of the things LC has been doing lately (good and bad) are window dressing for an IPO.

Main things I've noticed is being a lot less optimistic about returns and defaults, making more of an effort to collect money from default loans, and raising some fees.
Title: LendingClub Files S-1 with SEC
Post by: core on August 29, 2014, 11:00:00 PM
A cursory glance at the filing tells me that all of you are slowly getting the shaft.  But you already knew that, right?

What shocks me is how sterile the comments are which do reference this.  Oh, that's right.  You don't have a choice at this party. 
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 29, 2014, 11:00:00 PM
Quote"> from: core on August 30, 2014, 07:51:46 AM
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 30, 2014, 11:00:00 PM
from: rawraw on August 30, 2014, 02:22:16 PM
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 31, 2014, 11:00:00 PM
Tsk tsk, Dan, such abrasiveness.  And with just a month or two to go until the IPO.  You had better get out your pom-poms if you want to be invited to any more yacht parties.  Girls only get tossed on the laps of folks who adhere to "our" code of conduct.  As for the definition of "our", I believe that can be found right above the entry for "several".

(Just as an aside, these "pom poms" I speak of are colorful devices wielded by cheerleaders.  Maybe in queenie English that term means something offensive.  I am not sure. )

Rawraw, as for what I was specifically talking about:  As we can all see, the retail investor is now a very small minority.  This is no surprise -- it has been heading this direction for quite some time.  After the IPO I expect that piece of the pie to shrink even further, but with the blue sky exemption there will be even more demand virtually overnight.  I would not be surprised if the retail investor is forced out altogether less than 2 years after the IPO.  Contrary to what LC management and certain journos may say about LC's so-called commitment to the retail investor.  Don't believe a word of it because it's pure bunk and all they're trying to do is put lipstick on a sloppy pig.

If your retirement plans include Lending Club, you had better be rethinking that.  Not that LC should  make up a substantial portion of your retirement savings anyway:  If LC runs into financial trouble then can/will loose your entire investment, because you have no claims to any portion of the "loans".  I realize most everyone here knows this, but I would not want to miss an opportunity to point it out yet again.
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 31, 2014, 11:00:00 PM
I get what you are saying, but not sure if I agree with the conclusion. In many areas of finance retail represents a smaller slice but they still have access. Only time will tell, though.

 The one counter point is that in traditional banking, you have access to unlimited institutional money as deposits often cheaper. The problem is you get no loan demand through it like you do.

I do expect fees will diverge, where institutions get breaks due to volume. But it may already be occurring
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 31, 2014, 11:00:00 PM
from: core on September 01, 2014, 01:52:45 AM
Title: LendingClub Files S-1 with SEC
Post by: JoeB on August 31, 2014, 11:00:00 PM
If recent times with less volume and lack of quality is any indication, then the handwriting is on the wall. The August  loan volume and quality was abysmal. Was DTI raised up to 40% to make more loans available for the retail market because higher grade are going elsewhere? Is all this a coincidence? One thing is certain, time will tell the tale.
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on August 31, 2014, 11:00:00 PM
DanB, I do agree that the risk you talk about isn't talked about enough.  Perhaps it's just my natural inclination as I've studied risk management a bit, but the risks are often ignored outside credit risk. And even then, people use the recent performance to infer that's how credit risk will always perform.  I just tell myself that many who are the main stream P2P guys aren't necessarily finance guys, so perhaps they honestly just don't think about it much.  I always try to point out the risks in this forum, but those comments typically go largely ignored.   

These forums and points of view of posters are extremely valuable in many areas, it just seems risk management is not one of them. The problem with risk is people are only concerned about it when they can observe it.  And if you can observe the risk, it is really too late to mitigate it.  So people will just respond "Well it hasn't happened yet DanB, who cares?"  Or at least, that's been my impression of these forums.  But this is a human problem, as this lack of focus on risk and being lulled into complacency exists all over in several areas.  And continually gets repeated in finance as well

If I ruled the universe, I'd be discussing underwriting changes, product expansions, and all these other things that increase the risk to viability of LC as a whole.  I agree that I think it's low, but with growth like LC it doesn't take long to assume a massive risky position.    I think LC has been managed well so far, but it doesn't mean we stop paying attention.
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on September 02, 2014, 11:00:00 PM
Rawraw.........I don't necessarily disagree with your analysis.  However it may surprise you to know that I too have virtually no background in risk management, banking or finance either. Many years ago I did spend 8 months at Merrill, but half that time was spent passing the Series 7 & the latter half spent realizing how much a stockbroker was really a stock "salesman" in reality. Then I quit & that was that. So I'm not sure if my personal story backs up your macro profile. But I will agree with you that there is a "human" problem, as you stated & an internet problem as well.

Although few will argue that the internet places incredible amounts of useful information at our fingertips, it is also no secret that the net has done a stellar job grouping like minded individuals in increasingly intransigent homogeneous pockets of thought. Evidence of this is plentiful in the news media................but you see it here as well.

Just like in the news media, here, the initial "tone" is set by the people who run the place, by the choices of what is covered & the manner in which that coverage is painted, presented etc. Here on this blog p2p coverage has always been overwhelmingly positive. This is completely understandable given the nature of this site & it's quite natural for p2p lovers to gravitate here, just like Prosper haters have gravitated to prospers.org (where no one ever says anything positive about Prosper) To be clear, I'm not suggesting that some cult like fanatical love for p2p exists here, but this site is far from "balanced"................& this is precisely the reason I believe you get very little discussion of the type of risks that you've brought up on a few occasions. Most people here love the idea of p2p & it tends to push other things out of mind or at least out of discussion.

 I think it was almost 4 years ago on the main blog area where I was involved in a back & forth exchange about risk or inflated rates of return, I don't remember precisely. But the one thing I clearly remember was a seemingly frustrated response from Peter which amounted to nothing less than..............why are you here as a p2p investor when you have so many criticisms of p2p? I'm not going to subject readers to another page long response to that outrageous comment ( as if one waves the right to question or criticize when one invests in an item)...............but that right there is a prime example what I mean by the tone of this blog. Though 4 years have passed, this tone, this lack of balance, this lack of a consistent & full throated opposition unencumbered by one man's understanding of "civilized discourse" is what was missing here then & now.

Why the little discussion of certain macro risks, why the lulled into complacency you brought up. Why the muted reactions that Core asks about? Or the seemingly shrugs of the shoulder ?

http://www.lendacademy.com/forum/index.php?topic=2623.0

Well I believe it can all be traced back to the tone set by management here. People hang around with like minded individuals. Most individuals who could provide balance don't stick around here for long. They make 1 or 2 hastily thought out negative comments & then just perhaps think screw it & move on.

Just like in politics or global affairs strong opposition isn't pretty & it's often not polite, but it is necessary if minds, assumptions, conclusions are to be continuously challenged. Progress & greater understanding is rarely achieved when everyone thinks the same way or shares the same view. The uber supporters of p2p never miss a chance to remind us all that p2p is this great destabilizing challenge to the damaged or antiquated banking system & maybe they're onto something. But these same supporters, the ones who call for destabilization are often the ones who have the "love it or leave it" mentality when anyone challenges & destabilizes aspects of p2p itself. I'm sorry but I see something fundamentally not quite right in that. 
Title: LendingClub Files S-1 with SEC
Post by: Prescott on September 02, 2014, 11:00:00 PM
from: DanB on September 01, 2014, 06:50:05 AM
Title: LendingClub Files S-1 with SEC
Post by: cfb on September 02, 2014, 11:00:00 PM
Quote"> from: Prescott on September 03, 2014, 01:46:36 PM
Title: LendingClub Files S-1 with SEC
Post by: BruiserB on September 03, 2014, 11:00:00 PM
Lending Club May Need to Justify Its Valuation

http://finance.yahoo.com/news/lending-club-may-justify-valuation-183003075.html?l=1
Title: LendingClub Files S-1 with SEC
Post by: Rob L on September 03, 2014, 11:00:00 PM
How many votes / replies can I get for "disruptor" being the most over used cliché term in existence today.
Wasn't it the Klingons that used disruptors?
Didn't Enron disrupt the energy trading business?
What business hasn't been disruptive to it's competitors?
It's laughable, but great marketing hype. Guess I'm just tired of hearing it. Group think.
Title: LendingClub Files S-1 with SEC
Post by: Victor on September 05, 2014, 11:00:00 PM
@ Rob L: Yes, Romulans, Klingons, Breen, Cardassians, Iridians and Orions used disruptors.  Just so y'all know, I'm ashamed to even know this.  As an aside, I would like to fire a disruptor at any person who uses that term outside the context of a Star Trek episode.
Title: LendingClub Files S-1 with SEC
Post by: DanB on September 07, 2014, 11:00:00 PM
from: Rob L on September 04, 2014, 06:38:35 PM
Title: LendingClub Files S-1 with SEC
Post by: AnilG on September 07, 2014, 11:00:00 PM
Very good article. These two points on executive pay and relative valuations are worth taking note.

Quote
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on September 07, 2014, 11:00:00 PM
from: AnilG on September 08, 2014, 02:10:09 AM
Title: LendingClub Files S-1 with SEC
Post by: rawraw on September 07, 2014, 11:00:00 PM
I'm not an equity analyst, but I doubt the Street will be valuing this company based on current margins. It'll be akin to Amazon

Their adjusted EBITDA for 2014 has increased relative to 2013 due to a combination of increased stock based compensation and acquisition fees.  If you look at the income statement, General and Administrative expenses rose from 13,103 in 2013 to 47,014 in 2014.  Things would've been much different without a lot of these expenses. 

Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on September 07, 2014, 11:00:00 PM
Dan,

I am waiting for Lending Club to file an updated S-1 to do proper valuation. At this point, question is can they even justify $3.8b valuation that they received during last funding round? As the article indicated and I concur, it is a difficult reach. Competition in marketplace lending has been increasing with more new platforms entering the market. Some of them seem to be gaining momentum. This will make it difficult for Lending Club to maintain their margins and growth. Is Lending Club even coming close to the growth that Prosper is showing?

But remember valuation and pricing tend to diverge significantly. So it is possible that soon after IPO, LC market cap may be in $5b range. Personally, I am trying to decide between Alibaba and Lending Club IPO who gets my "play" money. I feel Alibaba is on much more solid footing at this point.

from: DanB on September 08, 2014, 05:10:03 AM
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on September 07, 2014, 11:00:00 PM
from: AnilG on September 08, 2014, 12:58:45 PM
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on September 07, 2014, 11:00:00 PM
Article on valuation of Ali baba Alibaba's coming out party: Valued right, but is it priced right?

http://aswathdamodaran.blogspot.com/2014/09/alibabas-coming-out-party-valued-right.html
Title: LendingClub Files S-1 with SEC
Post by: TravelingPennies on September 07, 2014, 11:00:00 PM
Thanks for the link to the article. I really like Aswath's posts. I have read his books and papers and use his valuation methodologies for my own valuation estimates. I am more excited about Alibaba as I have used their services. If you want to build any physical product, Alibaba is the place to go to find manufacturers worldwide. While still dominantly in China, they are spreading their wings to other Asian countries and that is where I believe the growth is. I heard they are also opening office in Seattle area with focus on cloud computing similar to Amazon Web Services.

from: rawraw on September 08, 2014, 08:50:05 PM
Title: LendingClub Files S-1 with SEC
Post by: toiletpaper55 on September 16, 2014, 11:00:00 PM
Quote"> from: Prescott on September 03, 2014, 01:46:36 PM