Lending Club IPO is a big boost for the peer-to-peer lending sector

The flotation of Lending Club is a milestone for the fast-growing P2P lending sector as it looks to raise its challenge to traditional banking. Kam Patel reports.


Lending Club founder Renaud Laplanche could see his 4% stake valued at more than $220m

US-based Lending Club, the world's biggest online lender, made its New York stock market debut today, marking a milestone for the fast growing sector as it looks to raise its challenge to traditional banking.

The online platform, which specialises in matching and connecting lenders with borrowers peer-to-peer' lending had its initial public offering (IPO) priced at $15 a share, valuing the company at $5.4bn. Shortly after its debut the San Francisco-based lender's shares had soared 67%, valuing it at nearly $9bn. The shares opened at $24.75 and touched a high of $25.4 in early action.

The IPO lookedto raise $870m, with the proceeds destined for repayment of debt and general corporate purposes.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Demand for Lending Club's IPO was buoyant. The FT notes that the $15/share initial offer, unveiled late yesterday, was more than the $12 to $14 a share range set out earlier this week. And that range itself was raised from the $10 to $12 a share indicated at the beginning of this month when Lending Club began its road show.

Flotation will bring more P2P lenders to the market

On Deck Capital, an online lender focused on small business loans, is just one of the sector players looking to follow in Lending Club's footsteps. It is expected to begin trading in New York next Wednesday, raising $180m.

On Deck's offer price is expected to range between $16 and $18 per share, raising $154m at the mid-point of the range, and potentially valuing it atas much as $1.2bn at the upper end.

Lending Club bills itself as "America's number one credit marketplace we operate at a lower cost than traditional bank loans and pass the savings on to borrowers in the form of lower rates, and to investors in the form of solid returns."

The company, which opened for business in 2007, claims it can provide borrowers "with average savings of 30% on their interest rates, and investors with steady, strong returns".

Critical to its success has been the use of technology to match borrowers to lenders much more efficiently and transparently than has been the case with traditional banks and institutions. It is this expertise, says Lending Club, that helps it lower the cost of credit, with savings passed back in the form of lower rates for borrowers and "solid returns" for investors.

In practice, customers interested in a loan complete an application at LendingClub.com. The company then evaluates the information (with no impact on the applicant's credit score), determines an interest rate, and instantly presents a variety of offers to qualified borrowers. At the supply end, investors ranging from individuals to institutions select loans in which to invest, earning monthly returns. The entire process is carried out online.

High profile Lending Club board members stand to win big

Lending Club founder and chief executive Renaud Laplanche, meanwhile, was looking at his 14.9 million shares around 4% of the company being valued at more than $220m at the IPO price.

Laplanche has said that the Lending Club concept grew from a "disruptive idea" back in 2006. Since its launch, the platform has overseen or "originated" more than $6bn in loans.

According to Reuters, the lender's shareholders include Norwest Venture Partners, Foundation Capital LP,Morgenthaler Venture Partners, and Canaan LP.

Lending Club reported net loss of $23.9m for the nine months to September versus a profit of $4.4m a year earlier. Revenue more than doubled to $143m over the period.

Kam Patel

Kam is a former deputy editor at Hemscott Invest and online editor, City A.M and he was also previously the Digital Editor at IFA Magazine. Kam is currently a senior journalist at The Global Treasurer and contributes to MoneyWeek. Kam shares expertise on the FTSE 100, investing and global stocks.