Lending Club has a new S-1 registration out this morning as they begin their investor roadshow this week. It gives us a window into their expected valuation and the amount of money they expect to raise. From their filing:
LendingClub Corporation is offering 50,000,000 shares of its common stock and the selling stockholders are offering 7,700,000 shares of common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares of common stock. We anticipate that the initial public offering price will be between $10.00 and $12.00 per share.
After the IPO there will be 361,111,491 shares of common stock outstanding at Lending Club so at $12/share this will result in a $4.33 billion valuation. This is less than all the pundits originally suggested and is only a small increase over the $3.76 billion valuation Lending Club received in April. Of course, they are no doubt hoping to get a pop on day one that will value the company much higher than that.
Lending Club Directed Share Program
There is a little information in the prospectus about their Directed Share Program (the shares that will be set aside for retail investors). Here is the entire paragraph relating to that program.
At our request, the underwriters have reserved up to 10% of the shares of common stock offered by this prospectus for sale, at the initial public offering price, to our directors, officers, employees, investors that have invested through our marketplace as of September 30, 2014 and other individuals related to us. Shares purchased by our directors and officers will be subject to a 180-day lock-up restriction. The number of shares of common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus.
So, there will be a maximum of 5 million shares available in this program and retail investors will have to share that amount with Lending Club employees, officers and directors. Given the anticipated demand for shares, particularly at this valuation, it is probably safe to say that not everyone will get the shares they would like.
I have setup my account on Fidelity and funded the account so I am ready to participate. But as of this writing there is no email from Fidelity as far as next steps go. I will update this post when I hear more. But it looks like we are on track for a December IPO for Lending Club.
You can read more about the news this morning on Bloomberg.
Kind of sucks the limited number of shares available to retail (especially after sharing with all insiders) but its still more than normally is held.
The valuation is ridiculously low, especially given growth and other info in the statement. A lot of it is done to keep early investors committed. Even after the initial enthusiasm wanes, the share price should still be over their issue price so everyone is happy. Too bad that the company is leaving a lot of money on the table.
Will be interesting to see what they do with the new capital as far as growth projects. Talked to Ron Suber last week and he was committed to keeping Prosper on the consumer side so sounds like Lending Club could build a real advantage in small business if they wanted. International growth would be interesting, maybe acquiring one of the large p2p players in the UK.
Could be a real advantage or a giant mistake ha ha
Thanks Joseph. While it is possible that by raising “only” around $600 million they are leaving money on the table they are also cognizant of the fact that they want a successful IPO. If the underwriters think the real valuation is $5 billion then price it less than that and have a nice pop at the open and on the first day of trading.
Keep in mind Lending Club are doing this more for a brand building and marketing exercise than because they really need the money. I think it is a good call to leave maybe $100 million or more on the table in order to increase their chances of having only positive news surrounding their IPO.
20x next year revenue is a “ridiculously low” valuation? I can’t imagine.
valuation is low? hilarious
We will soon find out what the market thinks is a reasonable valuation for Lending Club. If the market says it is worth $5 billion or $6 billion then that is what it is worth regardless of what anyone thinks. Now, what it will be worth in a year or two is a whole other conversation.
The paragraph on the DSP specifically calls out that directors and officers are subject to a 180-day lock. Is this standard language? It specifically excludes investors on the platform and “other individuals related to us.” Does this mean those individuals aren’t subject to the 180-day lock?
My understanding is that the 180-day lock will not apply to retail investors.
Sales grew 180% last year and the industry is still just a fraction of the personal credit market. Ron Suber of Prosper told me in an interview (posting next Monday) that they are focusing on personal lines and would not be entering small business, leaving that market wide open for LC.
The capital from the IPO will buy a lot of growth and there is a lot of room for improvement in op margin. Company is still spending heavily on eng/product development and on ‘other’ expenses (admin benefits).
I’m looking at an EV/ forward sales of about 18, which is high but not for that kind of growth. I think the shares could easily go to $17 which would be 40% even on the top range of the IPO. Guess it depends on your definition of ‘ridiculous’.
Peter…we talked years ago in the early days of LC. I have been with them since 2009 and I am both a retail investor and an early partner in LC Advisors BBF. (when the minimums were a lot lower). I’m excited about the IPO, have opened an account at Fidelity but have not funded it yet. Simply because I have no idea how many shares I might be offered. I wonder when that notification will be sent. It will take me a couple of days to liquidate other assets and that comes with tax implications. If the IPO occurs the week of 12/8 I need to move soon!
I would hate to fund it at the level of xxxx shares and then be offered xxx ! And vice-versa Nice quandary to have I guess. Wish I knew if all investors are going to be offered the same amount or if longevity and investment level will play a role. Any thoughts?
Read the forum, as they’ve discussed this somewhat in terms od ates. You won’t have much time, you’ll get the offer and need to have the funds pretty quickly.
Sully,
Good to hear from you again. As Rawraw said there is a great deal of discussion over on the forum about this: https://www.lendacademy.com/forum/index.php
You will likely need to be quick, you may have no more than 24 hours to move. I don’t think you will have time to sell your other assets once you have notice. I am keeping my requested amount in cash at Fidelity now.
Talked to Fidelity and there is an e-mail scheduled to come out today about the DSP & eligibility. The DSP was offered to 50,000 people so this is not a big deal for an individual investor. Minimum indication of interest will be 25 shares, and can increase in increments of 25 shares. No indication if the level of prior investment with LC or your longevity with them will be part of their methodology in allocating shares. Looks like the IPO will be on or around 12/10.
That matches what I have been hearing. But I have not heard if there will be preferential treatment given to long time clients or large accounts.
Are all investors subject to the 180 day lock up or just directors/officers of LC?
My understanding is that the 180-day lock will not apply to retail investors.
Anyone know what the maximum we’ll be able to buy through the DSP?
Thanks, Peter. You mentioned the “requested amount”. I have seen no such notification.
I’ll be watching for the Fidelity e-mail tonite. If the IPO happens on 12/10 I have time to fund my account. If it’s just a small number of shares (50,000 DSP invites for 50 million shares, it might not be worth the effort. But I will stay tuned! Thanks for your comments. Whatever happens, after 5+ years as an LC investor I can only say that it has been fun, profitable and totally devoid of investor stress. Where else can you find an investment whose value goes up almost every day?
Sully, There is a lot of talk on the Lend Academy forum about this today and in this post: https://www.lendacademy.com/how-to-invest-lending-club-ipo/
From reading the other comments it seems that we will get to request a number of shares and then we will be told what we will be allocated. It is not completely clear yet because I have heard a couple of conflicting stories.
Rec’d the e-mail from Fidelity. Minimum intent to purchase is 25 shares…maximum is 4000. At least that’s the e-mail I rec’d.
I seem to have a limit of 350 shares as of today, which is hardly worth my time. Anyone else higher/lower or is that consistent?
Apparently it’s income based. Well pooh on them.
Sully/Kowser,
I also just received my email a few minutes ago. I am also limited to 350 shares. I was hoping for more than that. I am going ahead because I want to be a shareholder and also to see how the process works. I may load up with more shares on IPO day with a limit order.
350 here as well, pretty unexciting
I also just received email. My limit is 350 also.
350 shares maximum as well for me. Guess if we want more, we’ll just have to buy them at the open of trading.
Was the maximum noted in your email or after you completed the steps
The email has a link to the directed share website (Fidelity) which then has a check list of your requirements, and also states the share limit.
Thanks. Looks like everyone is 350
350 max for me as well. Still showed interest for 300.
Can always buy more on a dip. Hoping we receive them at 10 or 11.
Open at 13.00 and pop to 15-16.
If the habit burger joint can make 120% in a day then I don’t why lc can make at least a
30% bagger in a day. Here is a web page I found on the Internet.( figured I’d share) read below:
New Global Financial Disruptors Equity Index launches in advance of Lending Club’s imminent IPO
3rd November 2014
New global financial disruptors equity index launched in advance of Lending Club’s imminent IPO
Liberum and AltFi Data have launched the first equity index tracking the world’s leading financial services’ disruptors – the Index is called the Liberum AltFi Financial Disruptors Index (LAFDI).
“With the imminent blockbuster IPO of Lending Club, the leading Peer-to-peer lender ” says Rupert Taylor, CEO of AltFi Data, “we believe it is important that equity investors have access to an index that comprehensively tracks the world’s leading financial services disruptors listed on the main exchanges of the developed world. The rise of non-bank and P2P lending crowdfunding, and related fintech businesses has galvanised many investors, as they begin to realise that this emerging sector is growing at a phenomenal rate. Lending Club’s IPO might value it in the billions of dollars but there are already well over two dozen market leading firms that have a listing – some of them also worth billions. Our Index captures these disruptors, all intent on knocking the incumbent banks off their perch!”
The Liberum AltFi Financial Disruptors Index (LAFDI) started tracking 28 of the world’s leading financial disruptors on October 1st 2014, however 3 years of historical performance is available.
The new Index combines a number of innovative features:
For the first time it gives investors targeted exposure to leading financial disruptors whilst excluding the incumbent banks
The Index is truly global in coverage and includes not only multi billion dollar businesses but also a substantial number of high growth, small cap companies
The Index has been constructed to emphasise liquidity requirements for the end investor – weightings within the Index have been carefully designed to balance those liquidity requirements alongside a need to limit the impact of the share price movements of the large market capitalisation companies within the Index
The Index has been built and is monitored by market leading experts, with an established sector pedigree. Liberum is an investment bank in the UK which works with many businesses in the emerging alternative finance sector while AltFi Data has quickly built a reputation as a pre-eminent source of independent information on this fast growing sector
Background to the Index
According to David Stevenson, head of marketing and PR for the Index: “The genesis of this Index is bound up in the concept of financial disruption. A paper from the summer of 2014 by HSBC looked to identify equity sectors where the potential for disruption of established business models was greatest. All the usual candidates appeared – mostly technological – but the financial services sector was mostly left off the list. Banks, we were told, were likely to be lightly disrupted (payments processing for instance might feel some effect) largely because the end user – the customer – was suspicious of change and wanted a simple product. Everything else in the paper sounded eminently sensible but this last section didn’t quite ring true. The financial services sector is undergoing a huge series of concurrent transformations, many of which will profoundly reshape the marketplace. Some of this change is coming from regulators, others from customers, many enabled using technology. In simple terms the traditional financial services business and especially the ‘bank’ model is now firmly under threat from disruption. Core parts of this ‘old bank’ model are under attack from new players and a new era of innovative financial services provision is upon us.“
According to AltFi Data there is a growing body of academic literature to suggest that this disruption is long overdue. A paper by Thomas Philippon at NYU suggests that the unit cost of financial intermediation has not fallen over the past century. In comparable industries, for example wholesaling and retailing, advances in IT have caused the ‘cost’, as measured by the GDP share of the industry, to fall dramatically. But a reduction in costs, and resultant rise in efficiency, has not yet occurred in the financial services sector. Philippon explains that “Despite its fast computers and credit derivatives, the current financial system does not seem better at transferring funds from savers to borrowers than the financial system of 1910.” If the new breed of disruptors can succeed this of course means that they will be serving a valuable social function. If the cost of finance could be reduced it would reduce costs for all and free up capital for productive purposes.
Rupert Taylor, CEO at AltFi Data also notes “ alongside this societal benefit will of course come investment opportunities. Spotting the ‘stars’ of tomorrow might be tricky – investors will first have to change the way they think about what constitutes a financial services business – is it a technology business or is it a next generation online brand? Does it have a banking license or not? Does it even need a banking licence?“
What’s in the Index ?
The Index features a number of sub sectors within the broad financial services space including P2P and direct lending, alternative financial services and related fintech businesses.
According to Sam Griffiths, MD at AltFi Data, the rise of the P2P lending sector (led by platforms such as Lending Club) is one crucial part of the transformation impacting financial services – “traditional banks have a large cost base, much of which is represented by their branch network. These branches are filled with staff, and used to perform a function as an important destination for both borrowers and lenders. However the internet has changed that. If the web can be the new destination then that cost base becomes redundant. And the web is well suited to matching borrowers and lenders, saving on overheads and allowing higher savings rates and lower borrowing costs.
“Disruptors within the financial services space are attempting to address these issues and more – many of the emerging successful disruptors actually try and provide financial products to clients who aren’t typically able to access banks in the first place.”
The Liberum AltFi Disruptors Index aims to observe and track these multiple, and concurrent transformations as they rip through the financial services sector.
The new Index is rules based and supervised by a committee. It takes seriously the idea of disruption and only includes financial services businesses listed on developed world markets which are challenging existing institutions, notably banks. Crucially we insist that any business that is included in the index must make use of a radically different model to the existing industry that it is beginning to disrupt.
Why AltFi Data?
AltFi Data was set up to explore, chart and analyse the fast evolving alternative finance space. For AltFi Data this alternative finance space describes businesses that have the internet at the core of what they do, use the internet to help determine a price for a loan or equity stake and are clearly social in the way that they use technology to bring together buyers and sellers. Crucially they are nearly always NOT banks – quite the opposite in fact, with many platforms explicitly rejecting the old banking model.
But alternative finance is just a small, though fast expanding, part of a much bigger universe of financial disruptors. There are a great many businesses listed in the US and the UK – and beyond – that are using technology to re-engineer financial services. Others are attacking the banking model by catering to new markets, in new ways – but in a fashion that isn’t necessarily ‘alternative’ in the narrow sense of the word that we traditionally use. The Liberum AltFi Financial Disruptors Index aims to capture this broader universe of businesses – it includes pure alternative finance firms as well as fintech specialists and of course includes businesses that challenge the banks and other major financial institutions via their innovative use of products and encroachments into new markets.
Why Liberum?
Liberum has a dedicated Alternative Finance team which advises participants in the direct and marketplace lending sector internationally. The Liberum Alternative Finance team were instrumental in the development of P2P Global Investments (Ticker: P2P LN), the first UK-listed company dedicated to investing in loans originated by leading peer-to-peer loan platforms around the world. P2P Global Investments undertook a successful initial public offering in May 2014, raising £200 million with Liberum as Sponsor and Sole Bookrunner.
Well that was one heck of a long comment Shane. I know the AltFi guys well and often share some of their articles in my Saturday news roundup. And the Liberum guys know this space better than just about anyone.
Yep, 350 shares.
Not as bad as I feared, not as good as I hoped.
Could be an interesting first day of trading. The DSP is almost certain to be oversubscribed, and how many of the vast majority who have been granted 350 shares will rush to sell at the first pop? (pretty sure the actual amount will be something less than 350). Doubt that will have much of an impact since there seems to be a great deal of institutional interest in this IPO. It should be fun to watch.
Where does everyone foresee this stock being at price wise a year, 5 or 10 years from now? 20s, 30s, 70s? Facebook for example dropped dramatically for about a year but now is more then double. Just interested to see everyone’s thoughts on this?
Well Phillip that is the $64,000 question isn’t it. I am happy to chime in with my opinion. It probably comes as no surprise to everyone that I am very bullish on the future for LC. Being the first company to go public gives them a big advantage over the rest of the field so I think they will continue to grow strongly for the foreseeable future.
I think the IPO will be priced around $12 and we will see a close on the first day of trading above $15 and I think we could easily see $25 within a year. Within 5 years I think LC will be doing $50 billion a year in loans which should mean over $2 billion in revenue and $300 million in profits. But if it maintains this fast growth it will still attract a high P/E. A P/E of 100 would put it at a $30 billion valuation which would mean around an $84 price. At 10 years it could easily be double or triple that that.
How is that for a rosy outlook? Now, just to clarify this is pure speculation on my part – I have no data to back up my claims, so please don’t take this as investment advice.
Peter, I like your outlook! Talked to Fidelity again and the news is that you have to confirm your indication of interest by Wed. 12/10 between the hours of 6:00 pm and midnight ET.
At that time you can decrease or delete the indication of interest but cannot increase it. I plan to fund my account at Fidelity on 12/9 now that I know I can decrease the # of shares once I know the final IPO price. (the old “not too many eggs in one basket” theory) Oh, and I also learned that there is no commission charged by Fidelity on this trade. That’s cool.
Thanks Sully. That is really good to know. We need to be standing by on Wednesday night.
The IPO price will be set by 6:00 pm and we will need to confirm the indication of interest, and if necessary decrease (but not increase) the # of shares we are interested in. For example if you funded your account counting exactly on a $12.00 IPO price and it jumps to $12.50 , you could decrease the # of shares to closely match your account balance. I have no idea what methodology will be used to determine how many will actually be granted in case of an over subscription, which I expect. The exact # of shares available to you will be revealed “shortly after the 6 hour confirmation period”. I assume they will be in your account early on Thursday (if that’s the actual IPO date) and that trading will begin late morning. Wonder if LC will get to ring the opening bell on the NYSE? Have to tune in to CNBC.
Thanks Sully for the info. It is going to be an exciting week.
Just saw one report that the IPO price may change dramatically. Up to $13 to $17 !!! Have no idea about the veracity of this report. Only a heads up if you were granted 350 and filed your in indication of interest at that amount and subsequently funded your Fidelity account at $4200. (350 X 12). If the IPO price is higher than $12, you will need to decrease the shares in your indication of interest after you learn the offering price. Scheduled for 6:00 pm 12/10 at this point. You will have 6 hours to decrease your indication of interest to match the funds in your account. Personally, I feel that $13 is possible but unlikely it will be higher than that. Someone can share this on the forum if you feel it’s relevant. Thanks.
The rumor mills have been running hot today. I have heard that the IPO will open at $18-20 and that it is 10x oversubscribed. It is going to be an interesting week.
Sully………….Been out of the country & internet-less for the past 7 days, so perhaps I’m being a bit slow here. While it may be true that one would have 6 hours to decide whether one wants to decrease the amount of shares “wanted”, I don’t see that decision to have anything at all to do with needing to “match the funds in your account” at the time. You could in fact have $5 in your account on Dec. 10th, & still go with a request for 350 shares, could you not? Does it not explicitly state that you have 3 business days after the first trade to pay for your shares?
That sounds right, just like settlement rules for any other trade activity. It is cleanly stated in DSP steps. Not sure why ppl making bug fuss of funding account at or before IPO date. What am I missing??
Hi Peter – thanks for all information, as usual. I may have found an important discrepancy that I was hoping you could clear up. You mention that, at a $12 share price, LC would be valued at $4.33 billion. The wise sage CNBC seems to disagree, speaking of a full-diluted valuation of $5.6 billion. See:
http://www.cnbc.com/id/102228735#.
What gives?
I am basing my information on the S-1. It says on page 9 there will be 361,111,491 shares of common stock outstanding. At $12/share that is $4.33 billion. Ari Levy of CNBC is normally right on the money but I don’t know how he gets to $5.6 billion here.
Peter:
You and Ari from CNBC are both right. $4.33B valuation you calculated is based on the 361M shares outstanding immediately after the IPO, but that number excludes option exercise that will soon be issued as common stock later (that info is clearly stated toward the bottom of page 9 of the prospectus you referred to). On a fully diluted basis, the true valuation of LC is $5.6B at $12/sh.
Thanks for the clarification. I didn’t think Ari would make a mistake like that.
It’s sounding like the price will be revealed just hours before we have to confirm. I’m putting my name in the hat for any news/rumors/etc.
They just increased it to $12-$14 price range on the fidelity website. I’m sure it will increase again in the next few days.
So what is Lending Club going to do with a billion $$ or so ? It’s not like they have a cash burn going on. A very well thought out IPO to this point. Don’t be surprised if the offering price goes up again by Wed PM. This is going to be fun to watch. This is a very unusual IPO. It’s hard to find a parallel or a benchmark. An incredibly swift company potentially disrupting the most staid & sacrosanct industry…unchanged pretty much for 100 years…Consumer Lending. Brilliant!
I think the major use of funds for LC is going to be acquisitions. I expect 3-4 acquisitions in 2015.
Scully, why are you pumping the IPO so much? Wouldn’t you prefer to see the company come out at a rational value so that you can see some appreciation longer term? We pump and pump and the thing goes out at $15 and then crashes the next day…
P2P. Because I’ve been with LC for over 5 years and it has been so much fun to watch it happen. And I have so much faith in this business model that I do not care what happens on trading day #2. I’m in it for the long term, plus I can’t afford the short term capital gains if I dump the stock immediately. This stock is still going to pop.
People always say they don’t care about trading day #2 or #3, but if you happen to be down 25% from day #2 to day #365, I’m sure you won’t be thrilled about it… let’s hope that isn’t the case.
Anyways, I think you would agree that less pumping before you buy something is a prudent position to take. Screaming to everyone that this is best thing since sliced bread before price setting is not exactly in your own best interest…