Lending Club - Time to panic?

[ChpBstrd]

We have information the stock analysts don't have: Absent the sort of changes that would make it just another small bank, LC is going to fail as a lending platform.

If you'd like to place a bet, you can set up a synthetic short all the way out to January 17, 2020.

Buy the $4.50 strike put for $1.40.
Sell the $4.50 strike call for $1.48.

Thus you take an $0.08 credit to enter a trade that moves the opposite of LC stock (over time, not immediately/daily). LC is already down 21% YTD.
Wait two years for this house of cards company to tumble, or cash out at the next earnings release. Your breakeven is $4.58, which is 8% higher than today's price.
Best of all, this is portfolio insurance. If the broader stock market declines, speculative companies like LC will get hit hard and your synthetic short will make up for some of your other losses. With this synthetic short, your leverage is about 3:1 on a company that is 60% more volatile/risky than the market.

I'm checking in on the performance of my synthetic short idea from December 6th.

Last put price 1.55
Last call price 0.91
----------------------
Current profit: 0.64

Assuming you had to deposit 100% margin ($4.50/share) for the short call, that's an ROI of 14.2% since December 6th. Multiply by roughly three to annualize that! Interestingly, most of the profit came from deterioration of the call.

Today the call is worth 0.53 and the put is worth 1.45. Factor in the 0.08 received upfront to enter the trade and you'd be up $1 per share. In that time, the share price dropped about 84 cents.

It might still be a good deal to short LC. Options expiring in 2021 are now available, plus several reliable recession indicators are now in the red zone. However, someone might still acquire LC for a premium. High risks and high rewards...

[chasesfish]

I think this company is going to zero, but still pretty negative on my $2.50 put options for Jan 2019 and Jan 2020.  I can't see how a company providing a negative return to its investors and lying about returns can survive

[MrUpwardlyMobile]

https://www.sec.gov/news/press-release/2018-223

Everything you need to know about lending club straight from the SEC....

[OrchardTree]

How does a stock go to 0 in 2 years when a company's debt is all collateralized by loans or cash and it even has excess cash?

[FIPurpose]

How does a stock go to 0 in 2 years when a company's debt is all collateralized by loans or cash and it even has excess cash?

Well if the loans won't be paid back and the business still can't make a profit, it's a worthless company.

[chasesfish]

How does a stock go to 0 in 2 years when a company's debt is all collateralized by loans or cash and it even has excess cash?

It can't make a profit...its operating costs exceed servicing fees it receives on loans.

If the loans its selling to investors are garbage and the portfolio is declining, they make less in servicing fees.  No money to pay people and IT.  Company bankrupt.

[FireLane]

I have about $8K left in Lending Club that I'm withdrawing as repayments trickle in, to the tune of a few hundred bucks a month. At this point, I'm just hoping they survive long enough for me to get all my money out.

[chasesfish]

I have about $8K left in Lending Club that I'm withdrawing as repayments trickle in, to the tune of a few hundred bucks a month. At this point, I'm just hoping they survive long enough for me to get all my money out.

This was me last year.  I ended up listing all notes someone would pay me the principal balance plus 1% and got $7500 or so back

[chaskavitch]

https://www.sec.gov/news/press-release/2018-223

Everything you need to know about lending club straight from the SEC....

Ouch. 

I've just been cashing out any accrued balance at the end of every month.  Is it even worth it to try to sell what I have left on the trading platform anymore?  I've got about $1600 left in my account, but listing my notes for sale after that nonsense ^ just seems like a waste of time.

[FIPurpose]

https://www.sec.gov/news/press-release/2018-223

Everything you need to know about lending club straight from the SEC....

Ouch. 

I've just been cashing out any accrued balance at the end of every month.  Is it even worth it to try to sell what I have left on the trading platform anymore?  I've got about $1600 left in my account, but listing my notes for sale after that nonsense ^ just seems like a waste of time.

I've been selling off somewhat successfully. I'm fine with taking a 5% discount though. I have about $600 left in LC notes, but I see I get about $2-3 per month on recoveries...

[WonderfulLife43]

Celebration time:  Withdrew my final $0.02 from LC today !!

[DS]

Celebration time:  Withdrew my final $0.02 from LC today !!

Woohoo! Time to panic? :D

[FIREball567]

I have $5,000 invested in 200 notes that I started a month ago. Now I'm regretting putting my money in here. It's a taxable account and I've made about $4.77. Don't think I should reinvest anymore.

[Padonak]

https://www.sec.gov/news/press-release/2018-223

Everything you need to know about lending club straight from the SEC....

Ouch. 

I've just been cashing out any accrued balance at the end of every month.  Is it even worth it to try to sell what I have left on the trading platform anymore?  I've got about $1600 left in my account, but listing my notes for sale after that nonsense ^ just seems like a waste of time.

I have 3K and change left, also withdrawing funds regularly. Can't be bothered trying to sell notes.

[marty998]

I have $5,000 invested in 200 notes that I started a month ago. Now I'm regretting putting my money in here. It's a taxable account and I've made about $4.77. Don't think I should reinvest anymore.

Wow - you might have bought your notes from a seller on this page....

[chaskavitch]

https://www.sec.gov/news/press-release/2018-223

Everything you need to know about lending club straight from the SEC....

Ouch. 

I've just been cashing out any accrued balance at the end of every month.  Is it even worth it to try to sell what I have left on the trading platform anymore?  I've got about $1600 left in my account, but listing my notes for sale after that nonsense ^ just seems like a waste of time.

I have 3K and change left, also withdrawing funds regularly. Can't be bothered trying to sell notes.

I just put the 20 or so newest notes up at about a 2% discount.  If they don't sell, I'll increase the discount and see what happens.  I'm mostly trying to get as much out as I can in case they go completely under.

[Syonyk]

I'm still not selling notes, but am not reinvesting and am pulling cash out. I need the money for next year's solar installation anyway.

I don't think them totally going under is likely, but I expect the note repayment will drop badly at some point. Hoping to be clear by then, but if I take a loss on the last notes, oh well.

[FIREball567]

I have $5,000 invested in 200 notes that I started a month ago. Now I'm regretting putting my money in here. It's a taxable account and I've made about $4.77. Don't think I should reinvest anymore.

Wow - you might have bought your notes from a seller on this page....

Yikes! What is the time frame for getting the notes paid? I've had the account for a month and only have earned $4.77.

[FIPurpose]

I have $5,000 invested in 200 notes that I started a month ago. Now I'm regretting putting my money in here. It's a taxable account and I've made about $4.77. Don't think I should reinvest anymore.

Wow - you might have bought your notes from a seller on this page....

Yikes! What is the time frame for getting the notes paid? I've had the account for a month and only have earned $4.77.

Well if you bought the notes all at the same time, the first payment is going to be until you hit about 1 month + 1-2 weeks. So give it a bit of time, it'll come in waves.

[grettman]

I am really surprised people from this forum invested with lending club. 

I recall a couple years ago LC had the financial blogging community sing their praises. 

I think MMM was one of them.  Curious to know if he feels differently and has said so.

[MrUpwardlyMobile]

I am really surprised people from this forum invested with lending club. 

I recall a couple years ago LC had the financial blogging community sing their praises. 

I think MMM was one of them.  Curious to know if he feels differently and has said so.

http://www.mrmoneymustache.com/the-lending-club-experiment/

He felt it was private welfare for responsible borrowers to offset deadbeats

[chasesfish]

I am really surprised people from this forum invested with lending club. 

I recall a couple years ago LC had the financial blogging community sing their praises. 

I think MMM was one of them.  Curious to know if he feels differently and has said so.

The praises were due to high referral/affiliate fees.  Those dried up, performance tanked, and praises stopped.

[appleshampooid]

I am really surprised people from this forum invested with lending club. 

I recall a couple years ago LC had the financial blogging community sing their praises. 

I think MMM was one of them.  Curious to know if he feels differently and has said so.

The praises were due to high referral/affiliate fees.  Those dried up, performance tanked, and praises stopped.

Sure, that's the cynical view. The more optimistic outlook is that MMM legitimately thought it was an opportunity for another passive revenue stream. It did look pretty good at the start.

I'm not saying he didn't get affiliate revenue (he is very transparent about this). But when the performance tanked, he was transparent about that as well and no longer recommends LC. His original article is still up, with some in-line edits saying he doesn't recommend it anymore.

[FireLane]

I am really surprised people from this forum invested with lending club. 

I recall a couple years ago LC had the financial blogging community sing their praises. 

I think MMM was one of them.  Curious to know if he feels differently and has said so.

I invested with Lending Club because I want to be diversified and it seemed like a good idea to have one income source that wasn't stocks (here was my reasoning if you're curious).

Naturally, this was dependent on them delivering the return they promised. For a while, they did. But my rate of return started to sink in 2017 and never recovered. Either their risk model is bad or they've loosened their standards, and either way I've lost faith in them.

[chasesfish]

There's nothing more telling with Lending Club than pulling the YTD Performance on the right hand side of the statement:

Interest Earned:  $494.65
Late Fees:  $1.32
Loan Losses:  ($1,028.72)

Wowza

No wonder this company won't report YTD, 1 Year, 3 Year, and 5 Year Returns.  They continue to just report return since inception, which included 2011-2013 notes when this was a good idea. 

[MarciaB]

Any new updates from anyone?

[ChpBstrd]

We have information the stock analysts don't have: Absent the sort of changes that would make it just another small bank, LC is going to fail as a lending platform.

If you'd like to place a bet, you can set up a synthetic short all the way out to January 17, 2020.

Buy the $4.50 strike put for $1.40.
Sell the $4.50 strike call for $1.48.

Thus you take an $0.08 credit to enter a trade that moves the opposite of LC stock (over time, not immediately/daily). LC is already down 21% YTD.
Wait two years for this house of cards company to tumble, or cash out at the next earnings release. Your breakeven is $4.58, which is 8% higher than today's price.
Best of all, this is portfolio insurance. If the broader stock market declines, speculative companies like LC will get hit hard and your synthetic short will make up for some of your other losses. With this synthetic short, your leverage is about 3:1 on a company that is 60% more volatile/risky than the market.

I'm checking in on the performance of my synthetic short idea from December 6th.

Last put price 1.55
Last call price 0.91
----------------------
Current profit: 0.64

Assuming you had to deposit 100% margin ($4.50/share) for the short call, that's an ROI of 14.2% since December 6th. Multiply by roughly three to annualize that! Interestingly, most of the profit came from deterioration of the call.

Today the call is worth 0.53 and the put is worth 1.45. Factor in the 0.08 received upfront to enter the trade and you'd be up $1 per share. In that time, the share price dropped about 84 cents.

It might still be a good deal to short LC. Options expiring in 2021 are now available, plus several reliable recession indicators are now in the red zone. However, someone might still acquire LC for a premium. High risks and high rewards...

Thanks for the reminder to check in @MarciaB

Put price: 1.40
Call price: 0.20
————————
Synthetic short value: 1.20
+ 0.08 original credit
————————
1.28 gross profit per share

Well that escalated quickly!

[FIPurpose]

Any new updates from anyone?

I have 2 more loans left. I've been selling them when they're current at about a 10% discount. I think I'll come out overall at a 5% loss over 3 years. I'll be very happy to have my money OUT! I should be able to dump them within the next 2 months. I'll keep the account around for the rest of the year to see if anything recovers and then close it out.

[chasesfish]

Any new updates from anyone?

My portfolio still sucks.  Finally had a month where interest income exceeded chargeoffs

[Villanelle]

I have no notes left, but I am still seeing some recoveries.  I just checked (after ignoring for months) and in March I made a few dollars and paid $.27 (I think) in recovery fees. 

I wonder, at what point, it will be done.  I just want to be finished dealing with it come tax time.  But I assume that I have to keep dealing with this as long as they keep recovering.  It's not worth the $10, or whatever it is I will make this year. 

Also, I looked through the charged off notes and have $25 (meaning they didn't make a single payment), $24.0X, etc.  Hard to believe these people didn't take the loans knowing they weren't going to pay them off.

[chasesfish]

Easy to loan money, not always as easy to collect.

[FireLane]

I have about $4000 left in LC, I'm withdrawing the cash in hundred-dollar increments as repayments come in. I'll probably draw the account down to 0 by the end of 2019 or early 2020.

When all's said and done, I'm guessing I'll make a profit, but only a small one. I would've done better to just put the money in Vanguard.

[pdxvandal]

I've put in 15k into Lending Club overall in the last 11(!) years. I have $46 remaining. Made roughly $3k and an additional $1k on their IPO. Small profit, but glad to be done with it.

[chasesfish]

One question for those who've wound out your account - At what level do you say "I'll keep $500 or $1000 in here".   I have 633 charged off notes that are generating some recoveries for me every month and theoretically should for years now that almost all of my loans are at the end of their life.

Its so little money for me now and they finally fixed the ability to import into turbotax.

[Tyson]

Investing in something like Lending Club seems to be not much different than trying to pick stocks.  Its GREAT if you happen to pick a winning company.  But it can be downright brutal if you don't.  Glad everyone seems to be getting their money out, I think it's clear now that investing with Lending Club was hella risky.

[Villanelle]

One question for those who've wound out your account - At what level do you say "I'll keep $500 or $1000 in here".   I have 633 charged off notes that are generating some recoveries for me every month and theoretically should for years now that almost all of my loans are at the end of their life.

Its so little money for me now and they finally fixed the ability to import into turbotax.

I kept basically no money in (I think due to the scheduling of my withdraw, I never dropped below $.27) , and I'm still getting money from recoveries, so unless I'm missing something, there is no need to keep that $500 in the account. 

[sisto]

I'm finally down to under $600 left in my LC account. Waiting for it to die a slow painful death so I can be free LOL

[appleshampooid]

2019 will be the last year I have to deal with P2P lending on my taxes. Praise Xenu!

[meatgrinder]

My Lending Club Returns.  Its turned out ok somehow but the taxes are brutal since defaults don't offset gains and are deferred.  I started investing in 2013 and started winding down over 1 1/2 years ago.

[appleshampooid]

My Lending Club Returns.  Its turned out ok somehow but the taxes are brutal since defaults don't offset gains and are deferred.  I started investing in 2013 and started winding down over 1 1/2 years ago.

As I remember, once a loan is charged off it goes into a 1099 as a capital loss, right? So eventually it will offset income, but yeah deferred.

But with that much invested, I imagine you could hit the $3k cap in writing off capital losses against income.

[meatgrinder]

My Lending Club Returns.  Its turned out ok somehow but the taxes are brutal since defaults don't offset gains and are deferred.  I started investing in 2013 and started winding down over 1 1/2 years ago.

As I remember, once a loan is charged off it goes into a 1099 as a capital loss, right? So eventually it will offset income, but yeah deferred.

But with that much invested, I imagine you could hit the $3k cap in writing off capital losses against income.

Right, thanks for the clarification. My account goes way past the $3K cap so a majority is deferred. 

[appleshampooid]

My Lending Club Returns.  Its turned out ok somehow but the taxes are brutal since defaults don't offset gains and are deferred.  I started investing in 2013 and started winding down over 1 1/2 years ago.

As I remember, once a loan is charged off it goes into a 1099 as a capital loss, right? So eventually it will offset income, but yeah deferred.

But with that much invested, I imagine you could hit the $3k cap in writing off capital losses against income.

Right, thanks for the clarification. My account goes way past the $3K cap so a majority is deferred.

That does suck. It's annoying that the charge offs can't go against the income in the same category and cancel out in the same year. Shrug.

[FIPurpose]

Well my last note has gone into default. I withdrew all my money, but then I found out: I have been making about $5-7 a week on recoveries. Sigh, well I guess I'll keep my account open through next year to see the recoveries roll in. I'm glad I'm almost done with this experiment.

[FIPurpose]

Oh I didn't notice this, but LC just did a reverse stock split this month of 5:1. So their stock of $3 is now readjusted up to $15. Why is this company still valued at 1.25 Billion?

[chasesfish]

Oh I didn't notice this, but LC just did a reverse stock split this month of 5:1. So their stock of $3 is now readjusted up to $15. Why is this company still valued at 1.25 Billion?

Its amazing to me.  I didn't earn anything on my put options, I guess the market can remain irrational longer than my options can remain open

[FIPurpose]

Oh I didn't notice this, but LC just did a reverse stock split this month of 5:1. So their stock of $3 is now readjusted up to $15. Why is this company still valued at 1.25 Billion?

Its amazing to me.  I didn't earn anything on my put options, I guess the market can remain irrational longer than my options can remain open

My guess is that your option were also readjusted? Can you tell what happened to them? Does it only represent 20 stocks now or how does that work? I have to think selling .2 of an option isn't possible.

[AlanStache]

Two weeks ago I started selling off my LC loans.  I am probably 80-90% into cash by now.  The returns have just not been worth keeping the account open and the larger worry of something else going to zero. 

All my loans are in a IRA account, does anyone know what the fees will be to transfer the balance to my Schwab IRA?  I fear that I will be left with 5.32$ in the account and it would cost 20$ to do a transfer. 

[sailinlight]

Two weeks ago I started selling off my LC loans.  I am probably 80-90% into cash by now.  The returns have just not been worth keeping the account open and the larger worry of something else going to zero. 

All my loans are in a IRA account, does anyone know what the fees will be to transfer the balance to my Schwab IRA?  I fear that I will be left with 5.32$ in the account and it would cost 20$ to do a transfer.

What discount you do you offer them at? I've been trying to sell my notes for several months now, and only get a few bites. Usually offer at around a .25% discount. Should I go lower?

[FIPurpose]

Two weeks ago I started selling off my LC loans.  I am probably 80-90% into cash by now.  The returns have just not been worth keeping the account open and the larger worry of something else going to zero. 

All my loans are in a IRA account, does anyone know what the fees will be to transfer the balance to my Schwab IRA?  I fear that I will be left with 5.32$ in the account and it would cost 20$ to do a transfer.

What discount you do you offer them at? I've been trying to sell my notes for several months now, and only get a few bites. Usually offer at around a .25% discount. Should I go lower?

Depends on the loan, but yes. Much much lower.

Here is my general assessment for what you can sell notes for:

Never late/ credit score is up since bought: -5 to +2%
Never late/ credit is same/down: -5 to 0%
Current: -15 to -5%
In grace period: -30 to -20%
Late: -40 to -30%
Super Late: -50 to -40%

[chasesfish]

Oh I didn't notice this, but LC just did a reverse stock split this month of 5:1. So their stock of $3 is now readjusted up to $15. Why is this company still valued at 1.25 Billion?

Its amazing to me.  I didn't earn anything on my put options, I guess the market can remain irrational longer than my options can remain open

My guess is that your option were also readjusted? Can you tell what happened to them? Does it only represent 20 stocks now or how does that work? I have to think selling .2 of an option isn't possible.

They're January puts at $2 share.  I only have $150 worth left, made the trade break-even back in December when the market was crashing.  Just holding them until end of year then I'll take the loss to get it into this tax year