After its well-received float yesterday, we are starting to think about what Lending Club will do next with the proceeds of its IPO. Its shares opened at $24.75, well above the $15 a share price set on Wednesday and are performing well in the secondary market.
In the use of proceeds in its SEC prospectus Lending Club detail some the plans it has after the IPO.
It says that the “principal purposes of this offering are to increase our capitalization and financial flexibility”. It intends to use the net proceeds from the float for “general corporate purposes, including working capital, operating expenses and capital expenditures. We may also use a portion of the net proceeds to repay indebtedness outstanding under our term loan with several lenders led by Morgan Stanley Senior Funding, Inc”.
Interestingly, the prospectus also mentions that it might use the proceeds to “acquire businesses, products, services or assets”. Earlier this year Lending Club acquired Springstone Financial, which provides financing for elective medical procedures and education. This is one of the steps Lending Club has taken to diversify its product offering and it is likely that we will see it moving into new loan markets in the future.
Brendan Sheehy, an analyst at Fitch Ratings, commented:
“They could do potentially everything, every type of consumer and commercial loan.”
However, at the time of the release of the prospectus Lending Club representatives were unable to describe the exact uses of the proceeds more specifically.
-Execute in its core markets
-Broaden its loan product offerings
-Widen the spectrum of borrowers served
-Increase supply of capital available to borrowers
-Grow its ecosystem
-Continue to invest in its innovative technology platform
-Enter new geographies
There are many potential directions that Lending Club could head in after the IPO. The float has already done a massive amount to raise the profile of the company and the peer-to-peer industry, especially has it has been very well reported in the mainstream press.
As mentioned in its strategy for growth we could see Lending Club expanding into new markets. One market it might aim for is the UK, as like the US, it has a very well developed peer-to-peer market. If the platform were to act upon this, it would make sense for Lending Club to aim to acquire one of the big four in the UK market. AltFi Data recently researched the market share of the top four platforms, Zopa, Funding Circle, RateSetter and Market Invoice. Market share trends can shed light on the competitive dynamics of an industry. The combined market share of these four platforms reached a low in June this year but since then has seen a significant rebound. A way that one of these platforms could secure dominant market share would be to merge with or be acquired by another platform, and this platform could very easily come from aboard.
We will wait to see what direction Lending Club heads in, but we are almost certain that we will see some interesting innovations and developments from the company in the next year.