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Author Topic: FYI: 4 Reasons To Avoid LendingClub Stock

J
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FYI: 4 Reasons To Avoid LendingClub Stock
OP: December 12, 2014, 12:00:00 AM
I don't know about long term as there are a lot of pro and con but I ran across this and thought I'd share it:
http://www.forbes.com/sites/petercohan/2014/12/12/4-reasons-to-avoid-lendingclub-stock/2/

There are a lot of good reasons to go long but I just don't see it. Of course I didn't see Facebook either but I did see ebay and LC is no ebay. Therefore since FB is successful, LC should be as well. So I should go long because I don't see it and I'm wrong. Makes perfect sense to me.    ???  :-
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FYI: 4 Reasons To Avoid LendingClub Stock
#1: December 12, 2014, 12:00:00 AM
Thanks for sharing Joe. Always useful to get the opposite perspective.
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U
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FYI: 4 Reasons To Avoid LendingClub Stock
#2: December 12, 2014, 12:00:00 AM
Good article, pretty pessimistic!  ;D
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V
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FYI: 4 Reasons To Avoid LendingClub Stock
#3: December 12, 2014, 12:00:00 AM
As a side note, he railed against facebook at the IPO and said it was going nowhere.
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a
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FYI: 4 Reasons To Avoid LendingClub Stock
#4: December 15, 2014, 12:00:00 AM
"Is each dollar of LendingClub revenue really worth $43? If you annualize its $144 million in reported revenue, you get $192 million — and if you divide that by LendingClub’s $8.3 billion market capitalization you get 43."  Huh?  He must have gone to a different school than the one where I got my Math degree.
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r
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FYI: 4 Reasons To Avoid LendingClub Stock
#5: December 15, 2014, 12:00:00 AM
8,300,000,000 / 192,000,000 = 43.229

The words are a bit jumbled about which is the divisor but $43 is right if you do the math correctly.
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FYI: 4 Reasons To Avoid LendingClub Stock
#6: December 15, 2014, 12:00:00 AM
It is a really good article and echoes the concerns raised on this forum at one time and another. I wouldn't discount any of the concerns raised.

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T
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FYI: 4 Reasons To Avoid LendingClub Stock
#7: December 15, 2014, 12:00:00 AM
Anil, there have always been borrowers and lenders.  As rates rise, the cost of money from traditional sources will go up, too.  This medium exists for borrowers as a place below bank unsecured loan rates (when the banks will provide them) and above where investors are able to find returns other than equity shares.  As the bar moves, LC rates will have to move with them to stay competitive on both sides.  When I bought my first home, we paid 11.5% for the mortgage.  No one would think of paying that now, but in 1989, that was the going rate.  There will always be someone able to pay it, and someone willing to lend it.  Sorry, not buying that argument. 
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T
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FYI: 4 Reasons To Avoid LendingClub Stock
#8: December 15, 2014, 12:00:00 AM
Majority of loans on LC platform are credit card refinancing/debt consolidation, do you know why? Why do you think there are fewer borrowers with F. G loans and more borrowers with A. B loans? It is the interest rate spread between what borrower has to pay on credit card and on other sources vs on LC platform. By law, there is upper limit on credit card interest rate so when LC rates rise, the spread narrows and less incentive for borrowers to refinance.

How many people are refinancing residential mortgage with P2P platforms? None. Why are most real estate P2P platforms targeting commercial developments/mortgage/real estate developers and not single family homeowners? It is all about interest rate spread.

When your mortgage was 11.5%, how many financial institutions were pushing you to take the credit cards or unsecured loans? Very few because there was no incentive for institutions (spread was too small between interest rate on unsecured and secured loans and low risk government and corporate bond) to issue credit cards/unsecured loans.

Extrapolating your personal experience to apply to the larger world can lead you wrong way. There will always be borrowers and lenders but why would they go with P2P platform versus another sources. Barring any other value prop, borrowers will always gravitate toward lower interest rate and lenders will gravitate toward higher return/lower risk.

from: avid investor on December 15, 2014, 03:10:47 PM
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T
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FYI: 4 Reasons To Avoid LendingClub Stock
#9: December 15, 2014, 12:00:00 AM
I agree that CC refinance and kitchen remodelings will only take LC so far. They need to think very big, startups, medical school loans, larger loans for mortgages and businesses, international loans, w/e, they should do it. Also wouldn't mind seeing payday type loans, $1000 for six months at 35%-50% interest. Don't care. I think the major threat to LC is running out of borrowers, not lenders. Despite everything, lots of investors drowning in cash searching for yield in the US. Throw chum to the sharks!
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T
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FYI: 4 Reasons To Avoid LendingClub Stock
#10: December 15, 2014, 12:00:00 AM
and another day of increases for LC stock and another bump up in my stop loss order.
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r
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B
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FYI: 4 Reasons To Avoid LendingClub Stock
#14: December 16, 2014, 12:00:00 AM
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