Lending Club public offering

[jabell]

Anyone going to invest in Lending Club when they go public?  What are your thoughts?

[GGNoob]

I got the e-mail from Lending Club and I signed up to get in on the IPO. Until I have more information about it, I'm not sure how much I'll put it (I assume there will be some kind of min and max). But I do plan on getting in on the IPO. If I make money day one, I may sell enough to get back what I put in and keep the profits invested for long term.

[pdxvandal]

I've signed up for an account via Fidelity (IPO administrator) as well but would like to learn more before pulling the trigger. I haven't had too many opportunities like this in the past, so may consider an investment between 1k and 3k.

[jabell]

I will sign up for the account later today.  It depends though, I will need to know more than what seems to be available now before I put anything into it.

[Scandium]

Aren't IPOs a losing proposition for small investors 95% of the time? I mean knock yourselves out, but I remember seeing research  that showed they almost always drop for a long time afterwards.

To answer the question; no I don't plan on it. I'd wait till after the lock-out period.

[jabell]

Aren't IPOs a losing proposition for small investors 95% of the time? I mean knock yourselves out, but I remember seeing research  that showed they almost always drop for a long time afterwards.

To answer the question; no I don't plan on it. I'd wait till after the lock-out period.

Possibly yes,,, I don't know thats why I would need to know more before I put any money into it. 

[bigchrisb]

Aren't IPOs a losing proposition for small investors 95% of the time? I mean knock yourselves out, but I remember seeing research  that showed they almost always drop for a long time afterwards.

To answer the question; no I don't plan on it. I'd wait till after the lock-out period.

Agreed, in most cases I'm skeptical of IPO's and tend to stick to the secondary market (and indexing!).  An exception however is with government privatisations.  I don't know about the US market, but in general government privatisations in Australia have been good for retail investors - basically because the seller has a vested interest in the small shareholders (voters) being happy - hence tend to price to favor them.

[FarmerPete]

I'm not going to for several reasons:

1) Even though I have a Fidelity brokerage, they are requiring me to open a second brokerage account to even show interest.
2) I have no idea what the minimum investment is.  I wouldn't mind putting 2.5-5k into it, but if the minimum is any higher than that, forget it.
3) Very speculative and risky.  Yes, you could get a 40% pop on day one, and you might be able to sell it for mad profits...or it could drop 30% in day one and you're only consolation is that it's a tax deduction.
4) I just don't like Lending Club.  I started investing with them in 2010, but quickly decided that was a bad call.  They don't let people in my state invest, so we're stuck buying them through their trading network.  That makes the time investment to keep invested very large.  Not to mention that all of the good loans get snapped up, but because their trading platform is awful, you can't tell what's been bought yet.  What this means is that I would spend a few hours and pull the trigger on 30 loans, but I'd only actually buy 5-10 at the end of the day.

The only reason I like LendingClub is because it seems like a great business model.  They have no risk from loans defaulting other than potentially pissed investors.  They only make their money off investor fees and maybe origination fees?  I got a little upset when I realized that they took 1% of every payment to the investor.  When you're investing in $25 chunks for 5 year time frames, what this means is that a common payment to me would be $0.10 interest and $0.40 principle.  They took 1% of the interest (rounded up of course) which means I paid them $0.01.  That's great, till you realize that they just took 10% of my profit.  The effect gets worse the smaller the interest part of the payment gets.

[Pooperman]

I will be putting some money towards the IPO. I like the company and what it represents as far as the future of finance. I'm guessing I'll put forward somewhere in the 2-3k range depending on share price of course.

[bondo]

The peer-to-peer lender is offering 50M shares at an expected price range of $10-$12 each. Insiders will be selling another 7.7M shares in the offering. The stock will trade on the NYSE under the symbol LC

Prospectus:
http://www.sec.gov/Archives/edgar/data/1409970/000119312514428454/d766811ds1a.htm

I have not found the IPO release date yet.  I signed up with Fidelity, but have not received any LC info from them yet.

[Beric01]

Buying an IPO is buying individual stocks (i.e. bad for diversification). It's also even worse for the individual investor than a typical stock, as a lot of insiders will know more about the true value of the company than the public when it first comes to market. Finally, you're paying a premium for the "cool" factor of owning a hot new IPO. I would never consider buying an IPO for these reasons.

[Left]

I don't get how LC going ipo route means it is successful :S, I thought peer to peer was dying down as banks opened up to public more which implies taking customers away from LC. So I see it as LC going ipo route as more of a fund raising move on its part and not how much money it can make for shareholders :S Plus in the end, how is it different than owning a bank stock if you buy the ipo?

[Pooperman]

I don't get how LC going ipo route means it is successful :S, I thought peer to peer was dying down as banks opened up to public more which implies taking customers away from LC. So I see it as LC going ipo route as more of a fund raising move on its part and not how much money it can make for shareholders :S Plus in the end, how is it different than owning a bank stock if you buy the ipo?

The biggest reason being that going public MAY open them up to investors in all 50 states, not just the ones they have now.

[daveydinner]

In Ben Graham's classic "Intelligent Investor," he made the point back in 1948 that IPOs are always (to paraphrase) announced at a price that is favorable to the seller and are by their nature, never a bargain.

[Pooperman]

IPO Dec 10th it seems like.

[brooklynmoney]

Yeah I'm gonna do it even though it's annoying to have to open up a new account when I already have one at Fidelity.

[Malaysia41]

Have you read the prospectus?   They are selling 66M shares at $12 apiece.  Market Cap (rounded) : $800M.

What do you guys think of that valuation?

Currently ~$6B in outstanding loans.  If I understand their fee model correctly ( which I might not ) - They make 1% on that balance per year, yes - so that's $60M a year in income. 

That puts the PE at about 13.  What am I missing or miscalculating?  PE of 13 seems reasonable. 

[Malaysia41]

Also, how many shares were you offered?  For me it was 350. I'd prefer more but, oh well.

[Pooperman]

Put myself down for 300. If the price is $10, that's $3k, if the price is $12, I'll drop it to 250 (also $3k). So yeah, only putting up $3k for this offering. Most of this money will come from a trust account my grandfather set aside for my college education years ago and barely funded, so the IPO will only cost me about $700.

[GGNoob]

Also, how many shares were you offered?  For me it was 350. I'd prefer more but, oh well.

350 offered and thats what I said I wanted. I had actually considered doing about twice that, so this limit makes it an easy decision for me.

[bingtamers]

Here's an article on the IPO that I think is pretty balanced, especially if you skip to the last section.

http://investorplace.com/ipo-playbook/lending-club-ipo-lc-stock/

I'm a fan of Lending Club, so this IPO is very tempting for me, but IPOs are generally a bad idea for small investors. This is a crap shoot for sure. It's more speculation than investing. I'm still on the fence but have registered to do it.

[Malaysia41]

Here's an article on the IPO that I think is pretty balanced, especially if you skip to the last section.

http://investorplace.com/ipo-playbook/lending-club-ipo-lc-stock/

I'm a fan of Lending Club, so this IPO is very tempting for me, but IPOs are generally a bad idea for small investors. This is a crap shoot for sure. It's more speculation than investing. I'm still on the fence but have registered to do it.

Totally speculation.  Don't put in any more than you are willing to lose. :).

[Undecided]

Have you read the prospectus?   They are selling 66M shares at $12 apiece.  Market Cap (rounded) : $800M.

What do you guys think of that valuation?

Currently ~$6B in outstanding loans.  If I understand their fee model correctly ( which I might not ) - They make 1% on that balance per year, yes - so that's $60M a year in income. 

That puts the PE at about 13.  What am I missing or miscalculating?  PE of 13 seems reasonable.

I haven't read the prospectus, but if that how you think you find market cap, I'm going to guess you didn't, either, or you didn't understand it, and should really consider whether you want to invest in something you don't understand.

[Undecided]

In Ben Graham's classic "Intelligent Investor," he made the point back in 1948 that IPOs are always (to paraphrase) announced at a price that is favorable to the seller and are by their nature, never a bargain.

No disrespect to the man, and maybe it was a different story then, but most US IPOs of the past generation have been most favorable to the underwriters. Still, not favorable to buyers.

[Malaysia41]

Have you read the prospectus?   They are selling 66M shares at $12 apiece.  Market Cap (rounded) : $800M.

What do you guys think of that valuation?

Currently ~$6B in outstanding loans.  If I understand their fee model correctly ( which I might not ) - They make 1% on that balance per year, yes - so that's $60M a year in income. 

That puts the PE at about 13.  What am I missing or miscalculating?  PE of 13 seems reasonable.

I haven't read the prospectus, but if that how you think you find market cap, I'm going to guess you didn't, either, or you didn't understand it, and should really consider whether you want to invest in something you don't understand.

This was just a one minute back of napkin calculation to get an idea of the valuation.  You're right this is not market cap, this is the market valuation of the offering.   The market cap at IPO is estimated at $4B.

I realize IPOs are total gambles. This back of napkin calc was to get an idea of the order of magnitude of the offering value vs earnings.  So PE was the wrong term here too.

Wow, I'm getting face-punched a lot in investment topics.  Part of it is that I'm rusty.  - I stepped away from active investing for about 10 years.  Another part is that I really need to use the right vocab, and spend more time studying.  Honestly I've been winging it and gambling quite a bit.  In this case I was sloppy with my words.  I'll tighten it up.

[brooklynmoney]

FYI, they raised the price range today, so for those who are going to invest its going to cost a bit more than we thought.

[arebelspy]

The people who want to invest: do you know anything about their books and how they're doing as a company?  Or is it pure speculation?

[Pooperman]

The people who want to invest: do you know anything about their books and how they're doing as a company?  Or is it pure speculation?

Part speculation, part I like their service, and part based on what the company represents. As for books, it's at the break-even point so this round of funding will push it towards profitability (growth still needed).

As for the price increase, that means I'm buying less.

[arebelspy]

The people who want to invest: do you know anything about their books and how they're doing as a company?  Or is it pure speculation?

Part speculation, part I like their service, and part based on what the company represents. As for books, it's at the break-even point so this round of funding will push it towards profitability (growth still needed).

As for the price increase, that means I'm buying less.

"I like their service" = still speculation.

Re: the bolded part.  What makes you draw that conclusion?

[Pooperman]

The people who want to invest: do you know anything about their books and how they're doing as a company?  Or is it pure speculation?

Part speculation, part I like their service, and part based on what the company represents. As for books, it's at the break-even point so this round of funding will push it towards profitability (growth still needed).

As for the price increase, that means I'm buying less.

"I like their service" = still speculation.

Re: the bolded part.  What makes you draw that conclusion?

They had their first quarter in the black this year, followed by increased marketing that brought it back in the red. It's right on that turning point.

[arebelspy]

What I meant was what makes you think more money (and/or growth) will make them profitable?

[Pooperman]

What I meant was what makes you think more money (and/or growth) will make them profitable?

It plays the role of middleman, so the more loans that are serviced, the more money they will make. The IPO has a chance to allow investors in all 50 states instead of the ones that have allowed it or not drowned it in paperwork. The only way this becomes profitable is through economies of scale. Bigger is better here.

However, the largest risk has to do with the investors in all 50 states thing. There may be a ruling on this at some point and it could be good/bad for firms like this in the future. Yes, it's speculation; but underneath there is a company treading water with a chance to rise above through growth. Again, growth is what will make it profitable because of the business model (1% transaction fees, origination fees, etc). High yield  means more investors, though that is also a risk from expected rate increases in that it would tend to drive away the anti-mustachians that make the other side work.

[arebelspy]

What I meant was what makes you think more money (and/or growth) will make them profitable?

It plays the role of middleman, so the more loans that are serviced, the more money they will make.

I don't necessarily agree.  I'm not convinced that 1) It's scalable, and 2) It's profitable long term.

If the investors don't make money, why would they keep using it?

Let me ask you then as someone who is a fan of the company.  Which is a better investment: Investing in the company's stock, or investing in loans on their platform?

[Pooperman]

What I meant was what makes you think more money (and/or growth) will make them profitable?

It plays the role of middleman, so the more loans that are serviced, the more money they will make.

I don't necessarily agree.  I'm not convinced that 1) It's scalable, and 2) It's profitable long term.

If the investors don't make money, why would they keep using it?

Let me ask you then as someone who is a fan of the company.  Which is a better investment: Investing in the company's stock, or investing in loans on their platform?

At this point? Their loans. Less speculative, longer track record, etc. They will make money so long as there are desperate Sukkas and investors willing to take the risk. It's a balancing act. Not enough Sukkas or not enough investors and they run into issues. For my experience, there are plenty of investors and a bit fewer Sukkas. Automation allows it to be scalable.

I have about $2500 in loans through the service, and will be putting $3000 in the IPO.

[arebelspy]

Okay.  So if you have $3,000 right now, and you're deciding where to invest it, and you say their loans are a better investment.

...why would you put it into the IPO?

(I'm not being contrary just for the sake of being contrary, just want to make sure you're thinking through everything and hopefully help others think through similar situations. :) )

[Pooperman]

Okay.  So if you have $3,000 right now, and you're deciding where to invest it, and you say their loans are a better investment.

...why would you put it into the IPO?

(I'm not being contrary just for the sake of being contrary, just want to make sure you're thinking through everything and hopefully help others think through similar situations. :) )

#1) I want the experience of going through an IPO

#2) Most of this money is "found" money (an old trust account I knew nothing about)

#3) I was going to invest some when I heard they were going public after it calmed down and things looked solid (perhaps $500)

#4) Their loans are far too big a proportion of my portfolio, and the original intent was to visualize compounding and that has been successful

#5) I intend for this to be relatively short-term in nature after which any resultant money will go straight into my IRA and into VTI.

I might gain/lose $100 in this. If it does decently well, I may consider hanging on to 100 shares, selling the rest, and possibly selling options on it (to see how that works). What was once true may not be in the future. At one point, CDs were all you needed to live comfortably. Sometimes stocks, sometimes bonds, sometimes rental houses, etc. I want to know how they all work and am willing to put $3000 towards my education.

[maki]

is it too late to get in if you open an account with fidelity today? i'm guessing yes...

edit:
I just messaged Fidelity, and this is the response I was given:

In order to participate in the Lending Club Initial Public Offering (IPO), you must meet one of the following eligibility requirements:


-$500,000 under a single Social Security number
-Accounts coded for participation in our Premium Service or Private Client Group Programs
-Have placed 36 or more stock, fixed income, or option trades in a rolling 12-month period


Please keep in mind that, although you may be eligible to participate in the IPO, submitting and confirming an indication of interest is no guarantee that you will receive shares. Clients who confirm their indications of interest might receive a portion of the shares requested, or none at all.

[Pooperman]

I requested 200 shares and was allocated 150 it seems like.

[TalkingGoat]

Turned out to be a pretty good short term gamble for DSP folks ($15 price)....I flipped it quick for 66% gain.

[GGNoob]

Sold my 250 shares at $24.40 for a total gain of about $2,341. Now back to my normal index investing.

[thesinecure]

Sold my 250 shares at $24.40 for a total gain of about $2,341. Now back to my normal index investing.

Nice score!  To be clear, though, let's not call this one "investing".  ;)

Will be interesting to see how things progress for them.  My primary concern with them (public or not) is if/when another credit contraction occurs.  If defaults were to tick up like they did in 2008-09, I would expect they'd run into a lot of trouble really fast.  At some point, these sorts of loans go "no bid" and become totally illiquid.

[pdxvandal]

I put in for 200 shares and was allocated 100. Oh well, can't complain. Holding onto it at least through this month before looking to sell, as my income was good this year and won't be nearly as high in 2015.

[GGNoob]

Sold my 250 shares at $24.40 for a total gain of about $2,341. Now back to my normal index investing.

Nice score!  To be clear, though, let's not call this one "investing".  ;)

Ya, this was more of a gamble that paid off.

[Pooperman]

Sold my shares, made about $1200. That's plenty. As someone above said, back to index investing!

[BayIslandSaver]

Glad to see others got in on the IPO...I requested the full 350 but only got 250...DW told me to sell, so I sold :)

Going through the IPO process was interesting to say the least.  Main lesson from the IPO:  regardless of how the stock performs these underwriters and brokerage folks make tons.  Fidelity takes a 3-4% but just for acting as the 'brokerage-er'.  The underwriters are probably getting a bit more than that as well.

Anyone have tips on getting a free wire transfer?  I owe JPM some dough...

[Fallenour]

@arebelspy

To answer your question, for every loan that P2P lender Lending club makes, they take anywhere from .5 to 1.5% from what Ive seen based on the individual requesting the loan.

P2P lending went from a barely breaking millions to a multibillion dollar industry across dozens of platforms in less than 5 years.

Their primary targets are debt condsolidation targeting credit card industries with less than favorable (usually over 15%) credit card interest rates.

In addition to the .5-1.5% they take as a fee, they also take usualyl 5% of the actual balance loaned to the individual, as well as they take a few points from the investor (ranging from .5-5%, depending on your account type).

As for the books themselves, they actually dont hold the majority of the loans debt, the investors do, they just run the collections agency on the back end, pay for the licensing fees at each state for collections and lending practices, and handle the loan processing.

They operate as a legally declared bank, but perform more so as a loan services provider/collection agency.

I hope that helps.

[brooklynmoney]

So are people going to dump their shares? I saw some already sold. I'm tempted to sell, except for the stupid short term capital gains tax rate. I think there's that new Medicare tax I'll have to pay on top of the regular income tax rate as well.

[arebelspy]

@arebelspy

To answer your question, for every loan that P2P lender Lending club makes, they take anywhere from .5 to 1.5% from what Ive seen based on the individual requesting the loan.

P2P lending went from a barely breaking millions to a multibillion dollar industry across dozens of platforms in less than 5 years.

Their primary targets are debt condsolidation targeting credit card industries with less than favorable (usually over 15%) credit card interest rates.

In addition to the .5-1.5% they take as a fee, they also take usualyl 5% of the actual balance loaned to the individual, as well as they take a few points from the investor (ranging from .5-5%, depending on your account type).

As for the books themselves, they actually dont hold the majority of the loans debt, the investors do, they just run the collections agency on the back end, pay for the licensing fees at each state for collections and lending practices, and handle the loan processing.

They operate as a legally declared bank, but perform more so as a loan services provider/collection agency.

I hope that helps.

I've lent tens of thousands of dollars on P2P lending sites.  I understand how it works.

My question was specific to the health of the company, not theory behind how it works.  :)