San Francisco-based LendingClub Corp. took the unusual step Tuesday of rescheduling its annual shareholders’ meeting, calling into question whether the online lender’s business is in order.
Peter Rudegair and Telis Demos of The Wall Street Journal had the news:
LendingClub’s executive chairman, Hans Morris, announced the postponement during what many investors assumed would be the first update from the company since its board pushed out Mr. Laplanche in early May.
The company’s shares were then halted for about 12 minutes on the New York Stock Exchange before the company disclosed the delay in its filing. The stock declined 7.5% on Tuesday.
In a separate filing, Baillie Gifford & Co., an investment manager based in Edinburgh, said it was no longer a LendingClub shareholder. Baillie Gifford said in a February filing that it held more than 34 million LendingClub shares, or about 9% of the company.
James Anderson, Baillie Gifford’s head of global equities, said the firm sold because of the events that led to Mr. Laplanche’s departure. Specifically, three LendingClub employees and the CEO left the firm after the company’s board discovered disclosure problems including one in which employees falsified data on some loans.
Olivia Oran and Joy Wiltermuth of Reuters report that Laplanche is considering a bid for the company:
In the weeks following his May 9 departure, Laplanche approached firms about financing a bid to take the company private, the people said.
The talks were preliminary and may not lead to a deal, said the sources, who asked not to be named because the matter is private.
Laplanche declined to comment on his future plans. A representative for LendingClub declined to comment.
Once the industry’s biggest champion, Laplanche has put the sector firmly in the regulatory spotlight. The Department of Justice is probing the circumstances leading up to his departure and the New York Department of Financial Services is separately investigating the company’s business practices.
Such regulatory heat could make it difficult for Laplanche to secure funding, one of the sources said.
Maggie McGrath of Forbes reports that some investors remain bullish on the company:
In a research note released Tuesday afternoon, BTIG analyst Mark Palmer reiterated both his $9 price target on Lending Club stock (which was trading at half that price during Tuesday’s regular trading hours) and his “buy” rating on the company — a rating that has been in place since before the start of the sturm und drang.
“We believe the value proposition offered by Lending Club’s core business – to generalize, taking consumers out of 19% APR credit cards and putting them into 12% term loans – remains very much intact,” Palmer wrote on Tuesday. “Moreover, in a persistent low interest rate environment, the enhanced yields offered by Lending Club’s loans should help stabilize the company’s investor base.”
This is not irrational thinking. And in fact, it’s been Lending Club’s value proposition since it went public in December 2014: borrowers get better interest rates on their debt and investors who buy Lending Club loans off the platform see yields as high as 20% (if, of course, they’re willing to buy D-rated loans). But the core business model isn’t what changed in the beginning of May. What has changed is shareholder confidence — and Lending Club’s stock price — in the weeks since Laplanche resigned and the company revealed it had sold an investor $22 million worth of loans whose characteristics went against that investor’s “express instructions.”
