The market has been waiting for the last couple of years for peer-to-peer lending platform Lending Club to go public. I had projected that they would rather wait to hit the $100 million revenue mark before listing. And looks like, they did just that.
Lending Club’s Offerings
San Francisco-based Lending Club claims to be the largest online marketplace in the world that connects borrowers and investors. Their platform has helped provide more than $5 billion loans since inception in 2007.
Lending Club’s platform has simplified both the borrowing and lending process for the industry. The platform automates the process of application, data gathering, credit rating and scoring, loan funding, investing and servicing, regulatory compliance, and fraud detection. Additionally, investors can purchase incremental shares in loans in multiples as small as $25.
They have also opened their platform to bigger financial institutions like banks, asset managers, insurance companies, and technology companies who can use this to transact on the marketplace and meet investment needs of their end-clients. While Lending Club does not disclose details, analysts believe that the company, as well as the industry, is seeing a lot more lending by institutional investors compared with the original peer-to-peer model that it was set up for. The trend is attributed to the wealth and analytical skills of these cash-rich investors who are able to judge and pick up the higher rated loans faster than the smaller, peer investors that the industry was designed for.
Lending Club has managed to do so well because of the higher returns they offer their investors. Investors investing in notes with the highest three ratings have seen historical returns of 5%-8.7% compared with fixed income options which have been operating at rates less than 3%. An investor investing through Lending Club can thus have access to the higher return notes
Earlier this year, Lending Club announced the acquisition of Springstone Financial for $140 million. Springstone focuses on providing affordable financing options for people looking to finance private education and elective medical procedures. They have a network of more than 14,000 schools and healthcare providers and have facilitated more than $340 million in loans. The acquisition will help them expand their footprint to more individuals.
Lending Club’s Financials
Lending Club earns revenues by charging their customers a servicing fee for the transactions conducted on their platform. They have seen significant growth over the last few years. Loans originated from their platform have grown from $717.9 million in 2012 to $2.1 billion in 2013. For the six months ended June this year, that number increased 125% over the year to $1.8 billion. The increased loans have resulted in revenues growing 190% over the year to $98 million in 2013. For the six months ended June 2014, revenues increased 134% over the year to $86.9 million. Their adjusted EBITDA has also improved from a loss of $4.9 million in 2012 to $15.2 million in 2013. For the six months ended June 2014, adjusted EBITDA improved from $3.8 million to $5.9 million.
Lending Club is venture funded with $392.2 million from investors including Black Rock, T. Rowe Price, Sands Capital Ventures, Coatue Management, SDT Global, FinSight Ventures, Google Capital, Foundation Capital, Amidzad Partners, Canaan Partners, Norwest Venture Partners, Morgenthaler Ventures, SVB Financial Group, Gold Hill Capital, Union Square Ventures, Thomvest Ventures, and Kleiner Perkins Caufield & Byers. Their last round of funding was held in April this year when they raised $65 million at a valuation of $3.8 billion. That is a significant increase over the $1.5 billion valuation they were at in May 2013.
They are now looking at going public and have filed to raise another $500 million. They are expected to list before the end of the year on the NYSE under the ticker LC.