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The initial offering price of Lending Club (NYSE:LC) shares was $15.00, higher than the $12.00-$14.00 range anticipated. When shares started trading for the first time on 11 December, they popped 65% before finishing the day up 56% at $23.43. Lending Club shares closed Friday at $24.69 and increased to $24.84 in after-hours trading.
The Emergence of Crowdfunding
If the 2008-2009 financial crisis did nothing else positive, it opened the door to peer-to-peer lending schemes, now commonly called “crowdfunding.” When banks began making lending how to come by, people did what people do in situations like this: They found another way and, perhaps, a better way. The thing that Lending Club and early competitor, Prosper, did was to connect those who needed cash with those who had it to lend. Forget the middleman, which, prior to Lending Club, was the banks. Borrow direct from “the crowd.”
The idea worked. In fact, it worked BIG TIME. But, as the old saying goes, “The higher you raise your flag (or your success is broadly reported), the more someone is going to shoot at it.” In Lending Club’s case, it was the U.S. Securities and Exchange Commission. God forbid that peer-to-peer lenders should be unregulated.
The salvos from the SEC nearly sank the Lending Club ship, until some new investors came along and set the ship aright.
Lending Club Is at the Leading Edge
I can’t, for the life of me, understand why people don’t trust bankers. (That’s a joke.) But it is clearly obvious that the crowd has much more confidence in peer-to-peer lenders. And there are a bevy to choose from, like Funding Circle, Earnest, OnDeck, AvantCredit, LendUp, CAN Capital, LendingHome, AssetAvenue, Swift Capital, and Social Finance. Expect these “newly emerging” finance and tech combination companies to follow Lending Club.
Back to the Lending Club IPO
Lending Club raised $870 million on the sale of 58 million shares, making it the largest IPO for a U.S. tech company in 2014. Have I got your attention now? Prior to the IPO, Lending Club had raised $400 million from venture capitalists. It has processed over $6 billion in loads to date. Revenues for the first three quarters of 2014 were up 122% to $143 million.
CEO Renault LaPlanche, and a lot of others, are ecstatic to have a launch that garnered nearly $200 million more than they had expected. Sam Hodges, co-founder of Funding Circle, said that, “We see the Lending Club IPO as a bellwether for a major structural shift in the way that consumers and small businesses get access to credit.”
Lest readers think that institutional investors have ignored Lending Club, Norwest Venture Partners, Canaan Partners, Union Square Ventures, Foundation Capital (which has a congratulatory page for Lending Club’s IPO on its website), Morgenthaler Ventures, and Klein Perkins Caufield & Byers are all invested in the company.
One Final Question
Have you noticed how so many of these upstart startups have juxtaposed their corporate names. Is it that they can’t spell, or has the space key on their keyboard stopped working?
