Lending Club, Death Dive or Buying Opportunity?

Lending Club (LC) stock has been getting pummeled over last six months. LC is underperforming the market and the other big banks like JPMorgan. Is this a buying opportunity or a dive into oblivion? Here is what I found...

Renaud Laplanche, CEO of LC is doing a lot of sailing these days but it appears to be for the right reasons. See Spotlight on Renaud Laplanche. 

Goldman Sachs has announced it is entering the peer-to-peer lending space. Some see this as trouble for LC, as if Lending Club will have a hard time competing with Goldman Sachs. Bullshit. Goldman Sachs is the greatest investment bank on the planet but that doesn't make them a great retail lending operator. This only proves there is giant money to be made in disrupting the banking sector.

Jamie Dimon of JPMorgan recently alerted shareholders in his latest annual letter that “Silicon Valley is coming” to the lending industry. JPMorgan paid a $13B fine to the United States or America with petty cash. More proof that disrupting the banking sector is a huge opportunity.

Barrons published on article entitled Lending Club and On Deck Stocks Too Rich to Buy on June 6, 2015. See excerpts below with {my comments}.

“We plan to enable about $7.6 billion in loans this year,” says Lending Club CEO Renaud Laplanche. “That’s essentially as much as our past eight years combined.”

Even investors who don’t mind paying crazy multiples for a fast-growing Internet business like Lending Club should step to the sidelines as the IPO lockup—the period in which insiders agree not to sell their stock—expires for most shares on June 9.  {If you are long on LC then the end of a lock-up period is a gift from God, not a reason to "step to the sidelines".}

The “peer to peer” lending style of sites like Lending Club is analogous to Uber’s matching of independent drivers with riders. {Uber's market cap is $40B disrupting cabbies, compare that to disrupting bankers.}

A pure marketplace like Lending Club makes money by charging borrowers an origination fee of 1% to 5% of the loan amount and by charging investors a fee of about 1%. {Calling this a "pure marketplace" means it will tend to a winner-take-all. As mentioned in the same article, LC is the "largest lending outfit". Numerous articles confirm that LC is the 800lb Gorilla in the peer-to-peer lending space. If LC continues to dominate the space, they could surpass the market cap of the incumbents like Chase JPMorgan in the not so distant future. Considering JPMorgan has a market cap of over $250B and LC is hovering around $5B (3jul15), that's a lot of upside potential.}

Most importantly, I invested $10k through Lending Club this morning.  I chose a basket of over 100 loans with an estimated yield of over 8%. The entire process took me less than 10 minutes. Are you f'in kidding me? That's amazing!!! 

Finger is on the trigger and twitching...

Spotlight on Renaud Laplanche, CEO of Lending Club

Lending Club (LC) stock is down about 45% from its high (30jun15). Is it a sell signal or a buying opportunity? A lot will depend on how Lending Club's CEO navigates the company through these troubled waters.  

"In the wee hours of April 19, Laplanche was skippering Lending Club 2, his 105-foot maxi-trimaran, on a 635-nautical-mile journey from Newport, Rhode Island, to Bermuda. The goal: to break the speed record for one of ocean sailing’s marquee courses...

It’s also quite a change from Laplanche’s day job running Lending Club, which he founded in 2006 and took public in December in the largest Internet IPO of 2014...

Laplanche grew up in Hyères, a small French town halfway between Marseille and Nice that’s known as a sailing destination. He began the sport when he was 7. By age 12, he began sailing on an Optimist. His parents sent him to a special school where he attended classes three days a week and sailed the other four. By age 15, he began racing, and three years later he won his first national competition. Two years after that, once Laplanche had won a second French national title, he faced a decision: to train for a spot in the 1992 Olympic Games in Barcelona or go to law school.

“I chose law school,” he says with a smile... {ouch, -1}*

Laplanche attended law school in Montpellier and two elite business schools, in Paris and London, before landing a job at the U.S. law firm Cleary Gottlieb Steen & Hamilton, in its Paris office, where he specialized in mergers and acquisitions and securities. In the late 1990s, with the dot-com boom in full swing, the firm sent him to New York. Like many others at the time, Laplanche caught the entrepreneurial bug. He founded a software company called TripleHop Technologies, which Oracle acquired in 2005. {quitting law to start a company +4} 

Shortly after, Laplanche moved to Silicon Valley to work for Oracle but quit a year later {I worked at Oracle, it was evil +3}, planning to take a sabbatical. Instead, he started Lending Club." {would rather start a company than lie on a beach +5}

Source: Forbes 16jun15

* {my comments}