Lending Club May Also Be Seeking a Buyer

This morning I just read this article on Reuters PE Hub. It claimed that Lending Club is also seeking a buyer at the same time they are preparing for an IPO.

LendingClub Corp., which is backed by investors including Kleiner Perkins Caufield & Byers, is pursuing a dual track process, two sources said.

The peer-to-peer lending company filed to go public in August but is also seeking a buyer, the people said. Goldman Sachs, who is an underwriter on the IPO, is advising on the sale, one of the sources said.

Now, let me say right away that I have no idea whether these rumors are true and I didn’t even bother contacting Lending Club about this because they would clearly say nothing. But it may explain why the IPO has not yet taken place. The original timetable said that the IPO would likely be before Thanksgiving. Given that they have not started their roadshow yet, that timetable is probably not going to happen.

I will be surprised if they do indeed sell before an IPO but it makes for an interesting exercise thinking about who would buy Lending Club. Given their lofty valuation I don’t think any bank would be willing to pay that much and as the article said private equity firms would likely not be interested either. If I had to guess I would say Facebook – they have shown they are willing to pay ridiculously high multiples in previous acquisitions and they have also indicated an interest in financial services recently. Then there is the historical link between the two companies – Lending Club launched in 2007 as a Facebook app.

It will be interesting to see how this plays out. I will obviously share when there is any real news to report.

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Emmanuel
Nov. 14, 2014 9:43 am

Quite an intriguing idea. Thanks for sharing, Peter!

Larry P.
Larry P.
Nov. 14, 2014 9:55 am

Google @ $6bn

jason h
jason h
Nov. 14, 2014 10:16 am

please no facebook.

Andrew N
Andrew N
Nov. 14, 2014 11:31 am
Reply to  jason h

Perhaps we could get some more loans on the platform with Facebook spamming ads for loans on everyone’s news feed.

Mike B
Mike B
Nov. 14, 2014 11:28 am

This only makes sense and i’m surprised we didn’t hear rumors about a sale until now. A buyer like FB would provide additional credibilty to the platform as the general public still doesn’t understand how it works. I think you’re right about FB Peter, only question is if there are additional suitors like GOOG or AAPL. I think if there are, LC ends up being sold before the IPO as it’s likely to get bid up substantially.

I look forward to seeing how this all plays out. In the meantime, i’m envisioning logging into my FB account to see which one of my friends needs a loan, and wondering what this will do to our relationship if he/she is late on a payment 🙂

Well
Well
Nov. 14, 2014 11:37 am

it was fun while it lasted

Simon Cunningham
Nov. 14, 2014 11:41 am

Woah. What an interesting development.

Peter Petras
Peter Petras
Nov. 14, 2014 12:16 pm

Does FB have the right customer? Prime/Prime++

RawRaw
RawRaw
Nov. 18, 2014 9:43 am
Reply to  Peter Petras

LC’s average borrower has been trending away from that Prime/Prime++ distinction.

Nobelief
Nobelief
Nov. 14, 2014 12:24 pm

Can Facebook adequately control loans or underwrite it credibly ? I personally believe this can lead to subprime mortgage level disaster on a platform like Facebook. What is a better acquisition would be money transfer tech like venmo etc.

JJ Hendricks
Nov. 14, 2014 3:31 pm

Very interesting development if true. If it did sell I think some financial institution would be most interested. Maybe some large tech company like Google or Facebook, but I don’t really see either of those being as likely.

Chris
Chris
Nov. 14, 2014 6:02 pm

Wow Peter, thanks for breaking this…. I will be saddened if they get acquired by another company pre-IPO because then potential LC stock investors have to start all over with trying to decide if purchasing stock in the acquiring company makes sense.

I hope this isn’t true….

Sean Murray
Sean Murray
Nov. 14, 2014 10:52 pm

The weird part about a possible facebook acquisition is that Lending Club would need to return to its peer-to-peer roots, something it seems to have totally abandoned.

B
B
Nov. 15, 2014 12:32 am

Well, I did call it a few weeks ago on these pages, sort of…the ipo would be delayed, pushed to Q1 at the earliest. I didn’t think a private acq would be in the works, but I do think they don’t quite have their ducks in a row for public consumption. That leaves OnDeck (loss making)or SoFi (profitable)as possibly the next in line to go public, no?

B
B
Nov. 15, 2014 11:53 am
Reply to  Peter Renton

Thanks for the update, Peter.

I sense if the company were to ever change course and seek to be acquired, it appears highly doubtful that a regulated financial institution such as a bank would be the acquirer of LC or of any highly touted P2P lender. With the focus on lowering risk in the shadow of regulators, a bank would probably have difficulty justifying a P2P acquisition to shareholders. Generally in agreement with the comments from several posters here; this would leave larger, cash rich iconoclast companies seeking to layer new products onto their platforms as the next logical acquirer. We see Google investing in LC & Circle up, RenRen investing in multiple rounds of SoFi, etc. Curious to see how this plays out.

RawRaw
RawRaw
Nov. 18, 2014 9:45 am
Reply to  B

How does originating and selling consumer loans increase the risk profile?

B
B
Nov. 18, 2014 11:30 am
Reply to  RawRaw

On second thought, because these loans aren’t on the books of P2P companies, there is no added business risk for the buyer. Individual lenders are taking the risk while the P2Ps collect fees for bringing together buyers and sellers. The real risk is paying rich multiples they can’t grow into.

Joe
Joe
Nov. 15, 2014 6:41 am

Peter,

With all the recent developments (ie data restrictions, rumors of sales) at Lending Club I’m wondering if LC is still the darling we once thought they were. I’m starting to wonder if Prosper is the true Cinderella. What thinks you?

C
C
Nov. 18, 2014 3:03 pm

I am a fan of LC and have been lending with them for a 18 months but I can’t find any metric to justify a 5b valuation.