Public trading in the stock of Lending Club, the New York-based online peer-to-peer lender, opened on the New York Stock Exchange last Thursday (11 December) and has so far had strong performance and positive reviews from analysts and investors. The company’s stock started trading at $15 per share on Thursday and immediately gained 67 percent on the first day. It closed at $24.98 yesterday (15 December), after dropping from its high of $27.71 that morning.
Analysts say this paves the way for other peer-to-peer and marketplace lending companies to enter the public market and while it may give them ambition, it also sets the bar pretty high. “The success of Lending Club provides a blueprint and a way for other such companies to pursue this path,” Brendan Sheehy, director of financial institutions at Fitch Ratings, told PDI.
Companies that could be next to list include peer-to-peer lender Prosper, the second largest online lender in the US, and small business lenders On Deck and Funding Circle, as well as the student loan-focused lender SoFi.
Traditional company stocks have had something of a wild ride in the past few months. After rising sharply from 16,141 points in the Dow Jones Industrial Average on 14 October to a high of almost 18,000 points on 5 December, they began falling again and closed yesterday (15 December) at 17,180.
The success of Lending Club has been attributed to its potential for growth and relative novelty in the public market: while there are many online tech companies that are publicly traded, as well as as large number of listed BDCs and asset management companies, a publicly traded online lender is a first. Sheehy said its popularity is “a function of the environment we’re in. There is a lot of liquidity in the market and investors are hungry for growth stories”.
Between its shareholders, early investors and board members, Lending Club has some prominent finance and tech backers. Board members include former Treasury Secretary Larry Summers and Morgan Stanley’s former chief executive John Mack. Tech entrepreneur Liron Petrushka was an early angel investor in the company. Stephan Paternot, the chief executive of Slated, an online film industry marketplace, is an investor and advisor in the company, according to CNBC.
Renaud Laplanche, Lending Club’s chief executive, founded the firm in 2007. He is the former head of product management for Oracle. The lender has arranged $6 billion in loans and paid $596 million in interest to investors since its founding.