Author Topic: Lending Club - Time to panic?  (Read 36989 times)


rahby1us

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Re: Lending Club - Time to panic?
« Reply #1 on: May 09, 2016, 12:08:26 PM »
I actually bought some shares of LC this morning as a result of this giant drop.

AM43

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Re: Lending Club - Time to panic?
« Reply #2 on: May 09, 2016, 12:13:00 PM »
Thinking about buying some as well.
I think there is a potential here to make a quick buck.

chesebert

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Re: Lending Club - Time to panic?
« Reply #3 on: May 09, 2016, 02:45:38 PM »
What makes you think the stock will go up? They have been going down hill since IPO. There could be a class action and LC could be forced to declare bankruptcy and delist its stock.

chasesfish

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Re: Lending Club - Time to panic?
« Reply #4 on: May 09, 2016, 04:08:54 PM »
I'm really debating this both as an investor and as someone interested in their stock.

I hate accounting irregularities, but if its earnings are accurate, they'll make about 0.27/share this year.  Financials trade between a 12 and 20x multiple and this one might be able to grow a little more.  At a 15 PE, the stock is worth about 4.05. 

The drop is from reeling back the growth expectations.

As an investor, I think I can get more upside then a regular 7% right now

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chasesfish

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Re: Lending Club - Time to panic?
« Reply #5 on: May 10, 2016, 04:25:16 AM »
One other note, my biggest fear as a shareholder is when multiple regulatory agencies jump on this news and start fining the company.  The people who did this are gone, all the government is doing at that point is stealing money from shareholders.  They're still fining other financial institutions from eight years ago.
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rahby1us

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Re: Lending Club - Time to panic?
« Reply #6 on: May 10, 2016, 09:31:23 AM »
I've jumped in a few stocks in the past on major down days and made (sometimes intra day) 15-20%. JCP, BP were a couple... Carnival Cruise Lines and VOW3.DE (volkswagon) would be a couple others where this was possible.

But as i check the market today i see i'm in the red 6% already today... We'll see.

adamwoods137

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Re: Lending Club - Time to panic?
« Reply #7 on: May 11, 2016, 03:00:59 PM »
Panicking is never a good plan but, here's a value investing podcast that touches on Lending Club:

http://seekingalpha.com/article/3973298-sweet-25-percent-gain-krispy-kreme-podcast

Acg

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Re: Lending Club - Time to panic?
« Reply #8 on: May 12, 2016, 07:40:40 AM »
What does this mean for those of us that are lending money out through their platform as an investment?  I stopped investing money a few months ago but I still have a sizable amount tied up.

I see that cash balances are FDIC insured but there's no insurance on money that I've loaned out.  Their website says that they've taken steps to protect investors in the case of bankruptcy but they give no details.  They say to look at their prospectus for more information but of course it's enormous and pretty dense.  So does anyone know if there are any protections in place for people lending money out through their platform? Thanks.

FIPurpose

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Re: Lending Club - Time to panic?
« Reply #9 on: May 12, 2016, 08:09:35 AM »
I think the loans will be safe, but I only have about 1-2% of my portfolio in LC notes. But I think the stock has farther to go. Especially if they get fined. The stock can easily start dropping to the $2-3 range.
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Fudge102

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Re: Lending Club - Time to panic?
« Reply #10 on: May 12, 2016, 09:08:09 AM »
I just saw this below:

http://www.cnbc.com/2016/05/10/why-you-shouldnt-panic-about-the-lending-club-scandal-commentary.html

It says not to worry but can't quite help it.  I've stopped my automatic reinvestment.  I'd love to restart but I'm just hesitant in the short term for the reasons everyone has been mentioning...


R5

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Re: Lending Club - Time to panic?
« Reply #12 on: May 12, 2016, 12:05:57 PM »
I'd suggest this could be viewed through multiple lenses.  You could be on the platform or buy the stock solely for financial ROI.  Alternatively you could be motivated by desire to encourage development of the peer to peer market. 

Here's a thoughtful read on the current situation:
http://seekingalpha.com/article/3974435-lending-club-worth-risk

For return on the platform personally I have doubts about the adequacy of their vetting mechanisms.  I suspect there is an asymmetry of information and expectation and that if one should be creating a default reserve at the same time you are booking the high yield interest.  This may be why MMM's return is trending down.

These points noted I frequently early adopt products where I want to encourage continued existence/help promote the space.  I like micro lending conceptually, particularly in developing economies and it doesn't work without capital.  I have no problem being willing to provide early stage seed capital in small amounts similar to being willing financially support research at an academic/medical institution.




 

TheStachery

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Re: Lending Club - Time to panic?
« Reply #13 on: May 12, 2016, 01:01:20 PM »
I emailed Lending Club, here is what they responded with:

Thanks for your email and continuous support of Lending Club. Regarding your concerns, here is a quick review of the facts, and how they relate to your investment with Lending Club:
 
·         None of the announcements this week relate to the quality of your investments with Lending Club. The solid returns and commitment to investors that we offer remain the same.
·         The issue has nothing to do with the quality of credit and did not relate to the performance of any loans facilitated through Lending Club. See here for data on how all loans have performed since our inception.
·         The issue that was identified and addressed related to whole loan sales to institutional investors. It did not relate to Lending Club Notes and did not affect investors in Lending Club Notes. 
·         There has been no change in servicing. We are servicing and processing borrower payments just like we always have, and the interest and principal payments they make will continue to be passed on to you just as they were before.
·         We’re in the business of trust and we cannot afford the slightest whiff of impropriety. The Board of Directors has acted to address this issue swiftly and decisively in the best interests of investors, employees, partners and borrowers.
·         The company has a strong, experienced management team at the helm that has been with the company since its earliest days (6 years apiece), and lends the company continuity in execution and vision.
 
For more detail, please see our press release. http://ir.lendingclub.com/file.aspx?IID=4213397&FID=34233669
 
Additionally, please note we remain laser focused on serving you – our investors – and we continue to pursue our mission of making credit more affordable and investing more rewarding, just like we did when you first invested. Trust is the center of our business and we are committed to earning it from you every day.
 
As always, please feel free to reach out to us directly at (888)596-3159 with any questions.
 
Best Regards,

Icecreamarsenal

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Re: Lending Club - Time to panic?
« Reply #14 on: May 12, 2016, 01:17:17 PM »
I've started liquidating my balance. It's a slow process withdrawing $50 at a time on a low 5 figure balance.
This has less to do with the news that the CEO was a scumbag and more with the realization (after reading miles dividend) that lending club loans are just junkier junk bonds.
« Last Edit: May 12, 2016, 01:20:04 PM by Icecreamarsenal »

Fudge102

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Re: Lending Club - Time to panic?
« Reply #15 on: May 12, 2016, 11:20:15 PM »
I don't know about that.  But then again I can't say too much about what the loans are.  The majority of it was handled by the algorithms.  I'd like to believe that they are good loans for people who need them.  It's made me a nice bit of cash in the meantime while the market's been rough.  That's really why I don't want to pull out.  I think LendingClub was probably better when it was new.  When it was peer to peer before larger companies got involved... but then again, I just don't trust big business.

pha999

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Re: Lending Club - Time to panic?
« Reply #16 on: May 13, 2016, 09:33:59 AM »
Not gonna panic... I own some LC shares after this drop. I also have an investing account with LC and Prosper. All and all it only accounts for about 3% of my total invest able assets between my cash, stock taxable account, IRAs and everything else... I do not plan to make p2p any bigger than 5% of my entire portfolio though. I suggest most people do the same, stay diversified and only invest what you can afford to loose in case things get worse.

FireLane

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Re: Lending Club - Time to panic?
« Reply #17 on: May 13, 2016, 10:16:46 PM »
I invest money in LC loans, don't own any of their stock.

I've been keeping an eye on this news too, but I don't see any reason to panic just yet. The ex-CEO may have been engaging in some shady business and not disclosing when he should have, but the loans themselves (at least for me) are performing as advertised. I don't think this story implicates the overall viability of the company or LC's usefulness to FIRE types as an alternative income stream.

That said, I'm keeping most of my assets in Vanguard. I don't plan for Lending Club to ever be more than a small part of my overall retirement portfolio. That was my plan before this news and it still is.

BlankCheck

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Re: Lending Club - Time to panic?
« Reply #18 on: May 13, 2016, 10:48:48 PM »
I invest money in LC loans, don't own any of their stock.

I've been keeping an eye on this news too, but I don't see any reason to panic just yet. The ex-CEO may have been engaging in some shady business and not disclosing when he should have, but the loans themselves (at least for me) are performing as advertised. I don't think this story implicates the overall viability of the company or LC's usefulness to FIRE types as an alternative income stream.

That said, I'm keeping most of my assets in Vanguard. I don't plan for Lending Club to ever be more than a small part of my overall retirement portfolio. That was my plan before this news and it still is.

Same here.  LC is just a small portion of my portfolio, but the loans have been performing just fine.  At least for now.  I'm not currently reinvesting, but might resume so later after my current notes mature a bit more.

Icecreamarsenal

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Re: Lending Club - Time to panic?
« Reply #19 on: May 17, 2016, 10:36:58 AM »
I've been withdrawing, and loans are terribly illiquid.  At this rate, it'll take me 3 years to liquidate. It's an ok 12% simulated return I have, but inaccessible.

chesebert

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Re: Lending Club - Time to panic?
« Reply #20 on: May 17, 2016, 10:44:28 AM »

Fudge102

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Re: Lending Club - Time to panic?
« Reply #21 on: May 17, 2016, 10:45:43 AM »
I'm wondering how much we the investors are actually hurting LendingClub right now?  How many of us have stopped investing in the loans and have therefore dug a deeper whole for them to climb out of?  I really want to restart my reinvestments but as mentioned here, I don't know what will happen to the company or the loans I'm currently tied up in.  The investigations in to one small percentage of the company could have profound consequences just because they exist.  Part of me wants to continue, I just wish we could know what the DOJ and then will do to LC and how it will affect the loans...

chesebert

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Re: Lending Club - Time to panic?
« Reply #22 on: May 17, 2016, 11:02:02 AM »
Fyi, treasury department's whitepaper on marketplace lending (i.e., LC).

http://www.lexology.com/library/detail.aspx?g=ee3a5193-59a2-4adb-b953-bfa2dd70521f

retiringearly

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Re: Lending Club - Time to panic?
« Reply #23 on: May 17, 2016, 11:11:04 AM »
I'm wondering how much we the investors are actually hurting LendingClub right now?  How many of us have stopped investing in the loans and have therefore dug a deeper whole for them to climb out of?  I really want to restart my reinvestments but as mentioned here, I don't know what will happen to the company or the loans I'm currently tied up in.  The investigations in to one small percentage of the company could have profound consequences just because they exist.  Part of me wants to continue, I just wish we could know what the DOJ and then will do to LC and how it will affect the loans...

According to this article, significant investors have suspended making loans.  This will only compound LC's problems.

http://www.bloomberg.com/news/articles/2016-05-17/lendingclub-shares-fall-after-investors-suspend-debt-purchases

chasesfish

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Re: Lending Club - Time to panic?
« Reply #24 on: May 18, 2016, 05:25:02 AM »
One of the challenges with all the "investigations/lawsuits" is they're only going to succeed in stealing money from shareholders that own LC today.  They won't succeed in clawing back anything from the management that left or the initial investors who cashed out in the IPO.

I really hate our legal system sometimes
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Slow2FIRE

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Re: Lending Club - Time to panic?
« Reply #25 on: May 18, 2016, 08:51:38 AM »
There is no way in hell I would try to catch this falling knife.  I thought I was going to be clever and play around with another stock that was in a similar situation and I got burned. Luckily it was chump change ($1700).

Of course they are sending calming emails.
Of course there is a mixed bag of analysts reports.
Of course I'd just look at the crashing stock price and try to put myself into the shoes of the those who invest with Lending Club's platform and those who are shareholders -> you might see some blips and spikes to make money if you are day trading, but this is not a safe buy&hold play at this point in time.  Maybe irrationality as it mis-priced, but I doubt that the mispricing will be irrational for long as more of the "users" of the service (the investors) become wary making the irrational pricing become quite rational.

I could be wrong, but my one try at gambling with a questionable stock burned me and now I err on the side of caution.  That dip in February we just had or last August?  Those are the type of irrational markets you can start buying into and profiting from.  A single stock collapsing:  Buyer-Beware!

Fudge102

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Re: Lending Club - Time to panic?
« Reply #26 on: May 18, 2016, 10:04:42 AM »
So ignoring the stock side of the house and just looking at the investing/loan side of the house, the question still remains.  I called up the number in their calming e-mail today and the lady was very cool, collected, and relaxed.  Willing to answer any and all questions.  And the general gist I got was the same as the articles I've seen online.  The CEO made a bad choice with a very small section of the organization and as bad as it was, it doesn't tie into the majority of the company.  So if you cut out the one rotten portion, is the rest still good?  Is it still worthwhile to invest as a loaner?  The actual debt the company has is a small fraction of the company.  Bankruptcy isn't a foreseeable conclusion unless everyone just stops and things are left to whither, but that's true of any company.

retiringearly

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Re: Lending Club - Time to panic?
« Reply #27 on: May 18, 2016, 01:34:34 PM »
Good article from today's Wall Street Journal.  My gut is that this will not turn out well for LC.  They need liquidity (people being willing to invest in their loans) for their business model to survive.  That will be difficult to pull off at certain times (such as right now).

http://www.wsj.com/articles/lendingclubs-loans-come-home-to-roost-1463511780

chesebert

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Re: Lending Club - Time to panic?
« Reply #28 on: May 19, 2016, 03:28:00 PM »
If LC goes belly up, I query whether the SEC will look into bloggers that pushed the LC stock and/or the LC loan investments. SEC interprets "investment adviser" broadly.

See below SEC guidance:

Who Is an Investment Adviser?

Subject to certain limited exclusions discussed below, Section 202(a)(11) of the Advisers Act generally defines an "investment adviser" as any person or firm that: (1) for compensation; (2) is engaged in the business of; (3) providing advice, making recommendations, issuing reports, or furnishing analyses on securities, either directly or through publications. A person or firm must satisfy all three elements to be regulated under the Advisers Act.

The Division construes these elements broadly. For example, with respect to "compensation," the receipt of any economic benefit suffices. To be deemed compensation, a fee need not be separate from other fees charged, it need not be designated as an advisory fee, and it need not be received directly from a client. With respect to the "business" element, an investment advisory business need not be the person's or firm's sole or principal business activity. Rather, this element is satisfied under any of the following circumstances: the person or firm holds himself or itself out as an investment adviser or as providing investment advice; the person or firm receives separate or additional compensation for providing advice about securities; or the person or firm typically provides advice about specific securities or specific categories of securities. Finally, a person or firm satisfies the "advice about securities" element if the advice or reports relate to securities. The Division has stated that providing one or more of the following also could satisfy this element: advice about market trends; advice in the form of statistical or historical data (unless the data is no more than an objective report of facts on a non-selective basis); advice about the selection of an investment adviser; advice concerning the advantages of investing in securities instead of other types of investments; and a list of securities from which a client can choose, even if the adviser does not make specific recommendations from the list. An employee of an SEC-registered investment adviser does not need to register separately, so long as all of the employee's investment advisory activities are within the scope of his employment.

For additional guidance on the definition of "investment adviser" and the applicability of the Advisers Act to financial planners, pension consultants, and others, refer to Investment Advisers Act Release No. 1092 (October 8, 1987) (part of the Investment Adviser Registration Package; see below).

TheStachery

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Re: Lending Club - Time to panic?
« Reply #29 on: May 20, 2016, 06:43:23 AM »
New letter to loan investors...

I'm Scott Sanborn, President and acting CEO of Lending Club. I've been on Lending Club's leadership team for the past six years as Chief Marketing Officer and Chief Operating Officer.
 
I know you have questions about the events of the past week and what it means for your investments.
 
Here are answers to a few questions we've heard this week:
 
•   What's happening with my assets? Nothing. Your investments are still yours. The performance of loans facilitated through the platform remains robust. We are servicing and processing borrower payments like we always have, and the interest and principal payments that borrowers make will continue to be passed on to you as they were before.
•   What's the status of Lending Club's business? We reported strong financial results for Q1 2016. We had solid originations, operating revenue, and adjusted EBITDA, despite a difficult economic environment. We facilitated $2.75 billion in loans and also reported a substantial amount of cash and securities - $868 million.
•   Where is Lending Club going from here? We're intensely focused on restoring our investors' confidence. We've talked to hundreds of our investors - spanning individuals to financial advisors to banks to large institutions - including some who are new to Lending Club. While some investors have paused, others have reiterated their interest. We remain committed to both our borrowers and investors, and are working day and night to prove to you that we deserve your trust.
•   I'm worried about Lending Club's data - what are you doing to reassure me? On Monday, we took the first of many steps to restore investors' confidence in our data. We shared the observations of an independent forensic data change analysis that looked at over 10 million test conditions on approximately 673,000 whole loans sold over the last eight quarters. Excluding the loans previously identified as having an issue, 99.99% of the loans the independent firm tested display either no changes or changes explained by the normal course of business. You can read the full details here.
•   Are you confident in Lending Club's management? Yes. Our Executive Team has been working together for the past six years and has deep expertise in credit, operations, marketing, finance, human resources and technology. We're also supported by one of the strongest Board of Directors in the industry. It includes Hans Morris (the former President of Visa and now our Executive Chairman), Larry Summers (former US Treasury Secretary), John Mack (former CEO of Morgan Stanley), Mary Meeker (a Partner at Kleiner Perkins Caufield & Byers) and other experienced executives.
•   What happens if Lending Club goes bankrupt? First and foremost, we are not going out of business. Lending Club has a strong business, a large balance sheet and we are here to stay. We have $868 million in cash and securities, which could cover our costs for a long time. Second, Lending Club has no claim to the payments you receive from borrowers, since each Note is tied to a loan, and loan payments are passed on to Note holders. Third, with a $10.2 billion loan portfolio that generated over $18 million in revenue in the first quarter of 2016 alone, we could profitably service the existing Lending Club platform as a standalone business, even if we didn't facilitate a single new loan. Finally, and I am only mentioning this because some have asked, if all else failed we would transfer our loan servicing obligations to a third party backup servicer. We have a longstanding contract with a third party to service loans in the event Lending Club can't, so that you'd continue to receive borrower payments (regardless of LendingClub Corporation's status). See our prospectus for more detail.
•   Why the Department of Justice subpoena? The Department of Justice often issues subpoenas in response to public disclosures such as ours, especially in light of the department's focus on financial services. The company is fully cooperating with the department's investigation.
 
Our Investor Services team has been working tirelessly to address as many of your questions as possible and I have full confidence in their abilities. Please do not hesitate to reach out by phone at (888) 596-3159 (7am-5pm PT, Monday through Friday) or email us anytime at investing@lendingclub.com.
 
We're working hard to make things right and I will continue to keep you informed as we move ahead.
 
Thank you for investing with us. We look forward to having you as an investor for years to come.
 
Sincerely,

Vagabond76

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Re: Lending Club - Time to panic?
« Reply #30 on: May 20, 2016, 09:15:41 AM »
This company, indeed the industry's whole business model, is fucked if the big boys don't provide money to make loans.  Peer-to-peer lending has NEVER been "peer" to "peer."  The "investors" looking to make a return have always been pension funds, hedge funds, investment banks, and endowment funds looking to increase yield.  It's never been about the little guy that writes a blog or reads this forum.

If the institutions don't provide funds for loans, then LC makes no revenue off of fees and the company shuts down.  The loans still exist are payable and enforceable according to the laws of the state specified in the loan contract.  But who is going to step in and service the loans--collecting payments and disbursing proceeds to the investors?  Is that covered in the investment contract?  Presumably another company will offer to buy the loan portfolio.  Are the investors stuck with whoever a bankruptcy trustee chooses?  That companies revenue will only come from one place--money that would have been payable to the investor.

Greenpez

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Re: Lending Club - Time to panic?
« Reply #31 on: May 20, 2016, 10:09:33 AM »
But who is going to step in and service the loans--collecting payments and disbursing proceeds to the investors?  Is that covered in the investment contract?  Presumably another company will offer to buy the loan portfolio.  Are the investors stuck with whoever a bankruptcy trustee chooses?  That companies revenue will only come from one place--money that would have been payable to the investor.

From the wall of text above your post:

"•   What happens if Lending Club goes bankrupt? First and foremost, we are not going out of business. Lending Club has a strong business, a large balance sheet and we are here to stay. We have $868 million in cash and securities, which could cover our costs for a long time. Second, Lending Club has no claim to the payments you receive from borrowers, since each Note is tied to a loan, and loan payments are passed on to Note holders. Third, with a $10.2 billion loan portfolio that generated over $18 million in revenue in the first quarter of 2016 alone, we could profitably service the existing Lending Club platform as a standalone business, even if we didn't facilitate a single new loan. Finally, and I am only mentioning this because some have asked, if all else failed we would transfer our loan servicing obligations to a third party backup servicer. We have a longstanding contract with a third party to service loans in the event Lending Club can't, so that you'd continue to receive borrower payments (regardless of LendingClub Corporation's status). See our prospectus for more detail."

Paul der Krake

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Re: Lending Club - Time to panic?
« Reply #32 on: May 20, 2016, 10:26:20 AM »
That's a nice email. They do have an extremely impressive board of directors.

I have declined to invest with them, but following this story closely. Interesting times.

robartsd

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Re: Lending Club - Time to panic?
« Reply #33 on: May 20, 2016, 11:20:38 AM »
This company, indeed the industry's whole business model, is fucked if the big boys don't provide money to make loans.  Peer-to-peer lending has NEVER been "peer" to "peer."  The "investors" looking to make a return have always been pension funds, hedge funds, investment banks, and endowment funds looking to increase yield.  It's never been about the little guy that writes a blog or reads this forum.

If the institutions don't provide funds for loans, then LC makes no revenue off of fees and the company shuts down.  The loans still exist are payable and enforceable according to the laws of the state specified in the loan contract.  But who is going to step in and service the loans--collecting payments and disbursing proceeds to the investors?  Is that covered in the investment contract?  Presumably another company will offer to buy the loan portfolio.  Are the investors stuck with whoever a bankruptcy trustee chooses?  That companies revenue will only come from one place--money that would have been payable to the investor.
There are many companies that specialize in servicing various types of loans. They get a small portion of the interest payments on the loans they service. I don't know the details of Lending Club's loan portfolio, but I imagine that the servicing contracts are a valuable asset. I'd honestly be more worried about LC shutting down as a borrower than as a lender. A change in servicer is a hassle and sometimes errors are made during the transfer. Also, loan servicing companies that do not originate loans have little incentive to provide good customer service to borrowers.

Telecaster

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Re: Lending Club - Time to panic?
« Reply #34 on: May 20, 2016, 11:28:53 AM »
One other note, my biggest fear as a shareholder is when multiple regulatory agencies jump on this news and start fining the company.  The people who did this are gone, all the government is doing at that point is stealing money from shareholders.  They're still fining other financial institutions from eight years ago.

Insane isn't it?  The government is acting as if owners of the company might actually have a tiny bit of responsibility for how the company is run.


fa

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Re: Lending Club - Time to panic?
« Reply #35 on: May 20, 2016, 11:41:32 AM »
Remember the old advice from Peter Lynch: NEVER invest in a company with known legal trouble.  The outcome is unpredictable and you may  lose your entire investment.  That is in regards to buying stock in LC.

As for the loans: they are likely safer but how much do you trust a company suspected of legal wrongdoing.  Maybe the CEO is the only one who has gone rogue and he is gone.  All is well now?  At the very least you can conclude that LC has inadequate internal controls.  Would you keep your money with such a company?  Maybe not.

This story remind us to carefully examine all investment advice, even coming from MMM.

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Paul der Krake

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Re: Lending Club - Time to panic?
« Reply #37 on: May 20, 2016, 12:44:25 PM »
http://finance.yahoo.com/news/exclusive-citigroup-declined-support-lending-club-memo-171322323--sector.html

Time to get out the popcorn....
What exactly is Citi's relationship with Lending Club? The compliance department at large investment banks rules on everything that gets released to the public. They would need an excellent reason to comment on an outside company, regardless of good or bad.

tyort1

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Re: Lending Club - Time to panic?
« Reply #38 on: May 20, 2016, 12:46:26 PM »
Why in the world did anyone think putting their money into Lending Club was a good way to invest?  I'm not particularly risk-averse, but good lord!  How can people not see how risky this is?  "Regular banks won't lend money to these people, so I will!"  WTF? 
Frugalite in training.

Another Reader

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Re: Lending Club - Time to panic?
« Reply #39 on: May 20, 2016, 01:37:44 PM »
http://finance.yahoo.com/news/exclusive-citigroup-declined-support-lending-club-memo-171322323--sector.html

Time to get out the popcorn....
What exactly is Citi's relationship with Lending Club? The compliance department at large investment banks rules on everything that gets released to the public. They would need an excellent reason to comment on an outside company, regardless of good or bad.

http://www.ifre.com/p2p-running-out-of-steam-thank-god/21247022.article

There is a lot more to the P2P story than what you see on the surface. 

I thought it was strange the banking industry was not up in arms over the loosely regulated competition.  Looking into it, it was obvious why.  The traditional lenders have co-opted the
P2P lending business.  It's now "marketplace lending" and P2P has very little to do with these businesses.

Stache-O-Lantern

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Re: Lending Club - Time to panic?
« Reply #40 on: May 20, 2016, 02:58:57 PM »
As for the loans: they are likely safer but how much do you trust a company suspected of legal wrongdoing.  Maybe the CEO is the only one who has gone rogue and he is gone.  All is well now?  At the very least you can conclude that LC has inadequate internal controls.  Would you keep your money with such a company?  Maybe not.

Well, Vanguard had legal trouble with tax issues last year, a lawsuit or two I believe, and accusations of tax fraud.  It was discussed on these boards, and i haven't heard that the legal issues were resolved.  Granted, Vanguard is a much more established company selling a product with a much longer history than LC.

I have a very small investment in LC loans (and a much larger investment in Vanguard mutual funds!) and I'm not particularly worried yet.  According to the news, the ex-CEO misrepresented some data on loans LC sold to an institutional investor.  How about that, he was misrepresenting information to the big boys, not the tiny investors on LC.  The tiny investors probably don't control enough money to be worth lying to.  Sure, maybe there will be an avalanche of lies that will now start to unravel.  We will see.

Stache-O-Lantern

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Re: Lending Club - Time to panic?
« Reply #41 on: May 20, 2016, 03:18:19 PM »
Why in the world did anyone think putting their money into Lending Club was a good way to invest?  I'm not particularly risk-averse, but good lord!  How can people not see how risky this is?  "Regular banks won't lend money to these people, so I will!"  WTF?

I chose LC for 3% of my taxable portfolio.  At the time i was considering that same % for a junk bond fund.  I ended up choosing LC instead.  Most of the people who get loans on LC have been lent to by banks through credit cards, and the point of the LC loan is to pay off credit card debt at a lower interest rate.  Sure, some may not actually do that once they get the loan.  I acknowledge LC loans are risky.  I was looking for high risk, and hopefully high return, for a small % of my portfolio.

I've been in LC for almost 3 years.  So far my annualized return, calculated in excel, is roughly 12.5%.  That's after expenses and loan write-offs, but before taxes.  I'm satisfied.  I can only wait and see what the recent circumstances develop into.

I've noted the number of LC notes for sale on the secondary market has almost doubled in the last couple weeks.  It's usually around 300,000.  Last night it was about 571,000.  Clearly i think some people are trying to get out.  So people were marking notes down more than usual.  I bought a couple with good payment histories at a greater discount than i can usually get.

chesebert

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Re: Lending Club - Time to panic?
« Reply #42 on: May 20, 2016, 03:20:33 PM »
For the folks doing LC loans, can someone tell me why you decided to investment in LC loans and not junk bonds. Presumably junk bonds have good yield, greater transparency and offer the protection of the securities laws and there is a bond trustee to enforce the terms of the bond. What makes LC loans superior to well diversified and diligenced portfolio of junk bonds?

Seppia

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Re: Lending Club - Time to panic?
« Reply #43 on: May 20, 2016, 03:43:52 PM »
For the folks doing LC loans, can someone tell me why you decided to investment in LC loans and not junk bonds. Presumably junk bonds have good yield, greater transparency and offer the protection of the securities laws and there is a bond trustee to enforce the terms of the bond. What makes LC loans superior to well diversified and diligenced portfolio of junk bonds?


Mostly because it was recommended by MMM.
It was / is play money amounts for me so willing to throw it on a hi risk hi reward.
MMM has made a huge net positive  difference in my life.
Probably LC was / is a bad idea but I guess the damage (if any) is going to be pretty minor.
Certainly, trying to get out when everybody else is sounds like a bad idea, unless all loans go to s**t

I'll stay put.


Stache-O-Lantern

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Re: Lending Club - Time to panic?
« Reply #44 on: May 20, 2016, 03:44:42 PM »
For the folks doing LC loans, can someone tell me why you decided to investment in LC loans and not junk bonds. Presumably junk bonds have good yield, greater transparency and offer the protection of the securities laws and there is a bond trustee to enforce the terms of the bond. What makes LC loans superior to well diversified and diligenced portfolio of junk bonds?

I have no great reason other than I enjoy LC.  I pick notes by hand after running a screen i came up with with all the historical data available on the nickel steamroller website.  My account is small enough that in a few minutes a week i can do that.  I also look for bargains on the secondary market for notes.  The great majority of my portfolio is in Vanguard index funds.  LC fulfills some inner need i have to trade, without screwing up the advantages of buy-and-hold index investing.

So far my return at LC has beaten Vanguard's hi-yield corporate mutual fund over the last roughly 3 years.  Only time will tell if that continues.  I don't have more $ in LC than i could afford to lose.

pha999

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Re: Lending Club - Time to panic?
« Reply #45 on: May 22, 2016, 07:23:46 AM »
Honestly my portfolio with LC is on autopilot, I do not plan to change any thing. Maybe stop contributing new money into the account, but will keep reinvestment's turned on. If any one here is panicking or loosing sleep over it you probably have way too much into Lendingclub in that case. Currently this doesn't amount to more than 2-3% of my net worth. Its such a small investment to me, thats it not even worth my time to read about whats going on with the company. For now its all up in the air, they may survive this and our money will be okay and heck they might not. But either way the small amount i do have in this I can recover in essentially a month and half of regular income.

pl28

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Re: Lending Club - Time to panic?
« Reply #46 on: May 22, 2016, 07:59:57 AM »
Same here, I think their business model will survive but probably will scale back a bit. I still have money with them which I will keep reinvesting. I have pause adding new money but plan to restart soon pending no major finding come up from DOJ. So far my yield has been what I expected (8-9%) and less volatile than the stock market.

Fudge102

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Re: Lending Club - Time to panic?
« Reply #47 on: May 22, 2016, 05:23:02 PM »
I just restarted my automated investing as well.  I figure, that even with all I have in there, it would take too long to get anything back that's worth it so might as well keep the small bits moving.  It sounds like there is enough of a backup plan that I wouldn't really be screwed anyhow.  Gotta spend money to make money.  Might as well see what kind of rates I can eek out.

Dollar Slice

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Re: Lending Club - Time to panic?
« Reply #48 on: May 22, 2016, 05:50:33 PM »
Why in the world did anyone think putting their money into Lending Club was a good way to invest?  I'm not particularly risk-averse, but good lord!  How can people not see how risky this is?  "Regular banks won't lend money to these people, so I will!"  WTF?

There are plenty of companies making money hand over fist off of imperfect borrowers (credit card companies, payday loans, etc.). You just have to make sure that the interest rate is sufficient to compensate for the expected defaults. The risk is mitigated by diversifying your investment over many many loans - they come in $25 increments. So you buy a few hundred of them instead of putting all your money into one risky loan - just like buying an S&P 500 index instead of buying a bunch of shares of one company. When I invested I was making about 12%. It was too high-maintenance for me at the time so I cashed out, but I can't complain about the returns or the risk.

Also, they weren't necessarily all people who banks wouldn't lend to. I bet a lot of them went to Lending Club because it's all done online and automatically - I think that's very appealing for younger people who don't have experience with getting loans and mortgages in B&M banks. I never loaned to anyone with a FICO under 700.
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joleran

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Re: Lending Club - Time to panic?
« Reply #49 on: May 23, 2016, 08:58:02 AM »
For the folks doing LC loans, can someone tell me why you decided to investment in LC loans and not junk bonds. Presumably junk bonds have good yield, greater transparency and offer the protection of the securities laws and there is a bond trustee to enforce the terms of the bond. What makes LC loans superior to well diversified and diligenced portfolio of junk bonds?

On the surface, these asset classes may seem similar because they're both high risk, high yield fixed income instruments.  However, there's one huge difference - LC note interest rates aren't tied to any underlying rate curve.  In the middle of the credit crisis when everything was going to shit in the bond markets, LC rates barely quivered.

Also, LC notes are higher risk as you note, but have higher return as well, and the markets are not efficient so there is plenty of opportunity.  I've been getting ~12% returns net of defaults every year since 2008 in LC by creating my own credit risk model that appears to be working.