By Daniel Lanyon on Wednesday 8 June 2016
Beleaguered marketplace lending platform Lending Club has added to its lists of woes by delaying an upcoming shareholder meeting and announcing that its second largest shareholder Baillie Gifford has sold out of the company.
In documents filed to the Securities and Exchange Commission, Lending Club said that it would postpone the upcoming Annual General Meeting until June 28, 2016.
“Given the developments of the last few weeks, the company is not yet in a position to provide its stockholders a complete report on the state of the company,” Lending Club said in a statement.
Lending Club was down 7.49 per cent Tuesday on the news of postponement to the meeting.
Performance of stock over 1 day
The double whammy of bad news are a further blow to investors who, had they invested since its stock market debut back in December 2014, have seen its value plummet. At its listing it was priced just over $24. After a short rally it began to fall. This was further exacerbated last month due to the shock departure of its chief executive Renaud Laplanche amid allegations of impropriety.
Performance of stock since IPO
Baillie Gifford, the Edinburgh based asset management firm, also said it had exited its holding of 9 per cent of Lending Club.
The £3.4bn Scottish Mortgage Investment Trust, managed by Baillie Gifford’s James Anderson and Tom Slater, is the vehicle in which most of firm’s stake of Lending Club was held.
Slater told AltFi last month before the news of Laplanche hit, that he was planning to stick with Lending Club despite its poor performance.
“The share price has been dreadful. It listed 15 months ago and it has been a one way ride ever since. It reflects two things. First, how it performs through an interest rate cycle, what happens when rates start rising.”
“The other is about credit quality and if you see a significant deterioration in credit quality how does that impact the supply of capital onto the platform. I feel very sanguine about those two things. It has been though the 2008/9 cycle in very good shape and that is one of the reasons for its success subsequently. But until you go through that, I don’t think the market is going to give it credit.”
“But I am incredibly bullish on the outlook for these platforms to take share in lending. They are just more efficient, and a more sustainable way to do it.”
However, the exit of Laplanche was clearly the final nail in the coffin for Anderson and Slater, who also recently upped their stake in payments fintech TransferWise.
In addition, Lending Club also said separately in a statement that it was raising interest rates by 0.55 of a percentage point across its risk bands, which it expects will reduce loan volumes by 5 per cent as a result.
However the firm also said it expects a slight improvement in gross losses due to tightening credit criteria. Debt to income criteria -excluding mortgages and the requested loan amount - is being reduced to 35 per cent from 40 per cent. It says this will impact risk bands E to G.
“The company expects improvements in gross loss forecasts to be offset by slightly lower recoveries. As a result, net losses are not expected to change," Lending Club said.
"Interest rates will increase by a weighted average of 55 basis points across the grade and term spectrum, calculated based on grade and term mix in Q1 2016. Rates are increasing across all grades but changes are concentrated in grades D, E and F."