Lending Club shares fell 11 per cent in after-hours trading after the world’s biggest peer-to-peer lender reported its first set of results as a public company and unveiled a loss of $32.9m for last year.
Also known as marketplace lenders, “P2P” companies aim to use new technology and online platforms to directly connect borrowers with lenders. The fast-growing industry has in recent years attracted the interest of professional investors who have lined up to buy the loans originated through the platforms, as well as the equity of newly-listed marketplace lenders such as Lending Club and OnDeck.
San Francisco-based Lending Club listed on the New York Stock Exchange late last year, raising $1bn and achieving a market value of almost $9bn on its first day of trading.
Its first set of results as a public company were closely watched by investors in the sector, who are keen to gauge the ability of marketplace lenders to make money off a business model that sees them take a small fee in exchange for connecting borrowers with investors.
The company reported a 2014 loss of $32.9m compared with a profit of $7.3m a year earlier, as expenses on marketing and product development overwhelmed the fees it makes from its loans. Revenue more than doubled to $213m.
Renaud Laplanche, founder and chief executive of the nine-year-old company, cautioned that: “2015 is going to be another investment year, and we intend to continue growing originations and revenue at a fast, yet deliberate pace.”
He forecast 2015 revenues of as much as $380m. Adjusted earnings, which strip out certain one-time costs such as acquisition expenses, could total $42m this year compared with $21.3m in 2014, he said.
In an interview, he added that Lending Club expects to make $7.6bn worth of loans in 2015 alone — roughly equivalent to the originations it has made since it was founded in 2006.
While the P2P business model has been lauded by many as a more efficient alternative to traditional bank lending, others have cautioned that it remains untested in a rising interest rate environment and subject to the whims of the investors who fund the loans.
Others have expressed concern that Lending Club, which has so far focused on consumer lending to high-quality borrowers, could be forced to make more loans to subprime borrowers as it seeks to maintain its momentum.
“We believe some investors may have been disappointed with Lending Club management’s call for growth that was both fast but deliberate,” said Mark Palmer, analyst at BTIG. “We believe this was prudent, as history has shown that unrestrained growth in credit-focused businesses is not a good idea.”
Shares of Lending Club fell to $20.98, valuing the company at roughly $7.76bn.
“I gave up trying to predict stock prices a few years ago,” Mr Laplanche quipped.
Additional reporting by Eric Platt
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