Lending Club boosts size of planned IPO

Lending Club has boosted the size of its planned initial public offering to $650m as it prepares to launch investor meetings next week and seeks a US stock market listing that is being hailed as a watershed moment in the development of the peer-to-peer lending sector.

The IPO, which is likely start to trading in mid-December, will be a closely watched both for the trajectory of the nascent P2P industry as well as for the key investors in the San Francisco-based start-up.

Those shareholders include former Morgan Stanley chief executive John Mack and former US Treasury Secretary Lawrence Summers, both of whom serve on Lending Club’s board and stand to see their stakes valued at millions of dollars.

Lending Club had initially aimed to sell around $500m worth of stock in its IPO on the New York Stock Exchange but has decided to increase the size of the offering to about $650m, according to people familiar with the deal.

One person added that the company would likely set a valuation range that starts at $3.8bn – Lending Club’s value during its final private financing round earlier this year – and then adjust the pricing based on investor demand.

Analysts expect the company to achieve a valuation of between $4bn and $5bn. A spokesperson for Lending Club declined to comment.

Lending Club has emerged as the leader of the P2P sector, which has seen a series of start-up marketplaces use the internet to connect borrowers and lenders. It could eventually challenge the dominance of banks in lending.

The company was founded in 2007 and grew quickly into the biggest P2P lender in the world, helping to originate more than $6.2bn worth of loans – three times the amount of its closest rival, Prosper.

According to Lending Club’s prospectus, Mr Mack has 2.4m shares and options in the company and Mr Summers has about 1m. Renaud Laplanche, Lending Club’s chief executive and founder, is the company’s biggest individual shareholder with 14m in shares options.

Lending Club’s IPO bankers, led by Morgan Stanley and Goldman Sachs, are likening the group to high-growth internet companies such as Facebook and Twitter as they seek to achieve the highest possible valuation.

Matt Burton, who is working to develop a secondary trading market for P2P loans called Orchard, said that the Lending Club IPO was a milestone for the industry.

“It’s big because it’s validation,” he said. “No one took social media seriously until Facebook IPO-ed. For all the people who are not taking this space seriously it’s harder to ignore once you have companies go public.”

Other P2P and marketplace lenders are waiting in the wings. OnDeck, an alternative lender that uses new technology to make small business loans, filed confidentially for an IPO earlier this year.

Lending Club is “another example that when you take a narrowly focused marketplace and adapt it for a specific product or service, the marketplace model can be very powerful,” said Rett Wallace of Triton Research. “They have solved a lot of problems in this category, such as credit risk, loan availability, and are very competitive on rates than the alternative.”