By AltFi on Thursday 28 August 2014
The long-awaited, watershed moment for the peer-to-peer lending world has finally arrived.
Scarcely a week has passed in recent times without some muttering about the impending Lending Club IPO. Now those rumours have become a reality. Lending Club will be looking to raise around $500 million, with a valuation somewhere between $5 and $6bn, and Morgan Stanley and Goldman Sachs leading the offering. It has been suggested by some that Lending Club could seek even more than the stated target of $500m. But the $500m target raise alone will be enough to rank the platform’s IPO as one of the 10 largest stock market debuts of any internet-based company.
Launched back in 2007, Lending Club rocketed to the top of the peer-to-peer pile and has stayed put ever since. The platform has now facilitated upwards of $5 billion in lending. By way of context, Lending Club alone has accounted for more than double the cumulative lending of the UK’s flourishing peer-to-peer lending industry – which according to AltFi Data stands at around £1.9bn. Lending Club has reportedly paid just shy of $494 million in interest to its investors.
“I believe Lending Club has the potential to profoundly improve people’s financial lives over the coming decades. Our mission of transforming the banking system is both audacious and achievable. Technology has successfully disrupted many industries to the benefit of society at large, and I believe banking is next.”
“It all started in the summer of 2006 when I opened a credit card statement charging me a 16.99% interest rate, and a savings account statement from the same bank where I was earning a 0.48% interest rate on my deposits. The extreme difference between these two rates – one paid by me to the bank and the other paid by the bank to me – made me wonder whether the existing banking system was indeed the most efficient mechanism to allocate capital from savers and depositors into the hands of people and businesses looking for affordable credit. At that point, I considered the idea that an online marketplace could be a far more cost-efficient solution. Now, with a seven-year track record and billions of dollars of credit extended, we have clear evidence that our platform delivers extraordinary value and a considerably better experience to borrowers and investors than traditional banks.”
A number of question marks still hover over the IPO. The price range of shares has been left undisclosed at present – and it is also unknown which of the platform’s existing investors will be selling on their holdings, or indeed upon which exchange the company will list. Furthermore, Bo Brustkern of LendAcademy points out that the LendingClub management has declined to comment on whether a specific segment of the offering will be made available specifically to individual investors. But Mr. Brustkern holds onto hope that such a provision may well materialize:
“We at Lend Academy have always been clear on this point: irrespective of the complications it entails, Lending Club is the kind of company – and Lending Club management are the kind of people – that can make a retail allocation work.”
The significance of Lending Club’s listing is global in reach. Perhaps most importantly, the much-anticipated IPO will be plastered all over the major media outlets over the next few days. Simply typing “Lending Club IPO” into Google immediately pulls up articles from the New York Times, Forbes, Wall Street Journal and CNBC. The profile boost – not just for Lending Club but for peer-to-peer lending in general – that this offering will engender cannot be underestimated.
Giles Andrews, CEO and Co-Founder of the original peer-to-peer lending platform Zopa, summarized:
"As one of the leading and fastest growing companies in the peer-to-peer lending sector, Lending Club's IPO can only help raise even more awareness for our industry."
Lending Club’s IPO will also serve as a benchmark for countless future valuations and public offerings within the peer-to-peer spectrum – as indeed it already has for Swedish short-term lender Trustbuddy. A few US and Chinese mega-platforms (such as Prosper and CreditEase) aside, the UK trio of Zopa, RateSetter and Funding Circle will surely be the next in line to begin weighing the benefits of going public. Soon they’ll have a beaten track to follow.
Rhydian Lewis, Founder and CEO of the UK’s second largest consumer lending platform, also weighed in:
“LendingClub’s intention to list this year is a further signal that peer-to-peer lending is moving to the mainstream.”
“It is hugely exciting news and will shine a light on the industry. We believe that we offer a great product and so welcome the additional attention. This move will mean more people hear about P2P and subsequently look into what the major platforms are offering.”