LendingClub’s Drama Continued On Monday


Monday’s trading action ended with the major indices posting modest losses after opening in positive territory.  Among one of the worst performing companies (not including penny stocks and those with low valuations) is a familiar name for many investors: LendingClub (NYSE: LC).

LendingClub (NYSE: LC), the online lending marketplace that faced a major scandal earlier in the summer which resulted in the resignation of its CEO.

Renaud Laplanche, LendingClub’s former CEO, was forced to resign from the company back in May after the company’s Board of Directors uncovered serious problems with its lending practices.

A report by The Wall Street Journal suggested that Laplanche himself ordered an internal probe yet he didn’t provide the investigators with a complete account of what he knew.

The Board also concluded that executives at the company knew loans it oversaw failed to live up to investors criteria.

A new executive team was put in place and many had hoped that the company turned around for the better.

However, LendingClub disclosed on Monday that it has to raise interest rates to its lenders following an increase in delinquencies.  The company confirmed in a regulatory filing on Friday that consumers will see an average increase of 0.26 percentage points.

LendingClub’s warning also has broader implications as it implies that consumers are likely taking on more debt due to persistently lower interest rates.

“Although the trend can now be observed across grades, it is less notable in lower risk grades and more notable in higher risk grades, particularly grades E, F and G, which account for approximately 12% of platform volume,” Chief Investment Officer Siddhartha Jajodia wrote in a letter to investors.

LendingClub’s stock is now trading lower by more than 50 percent since the start of 2016 and more than 65 percent over the past year.  The stock has now lost nearly 80 percent of its value since it began trading back in December 2014.

LendingClub’s business model also faces serious competition from a new entrance in the market – Goldman Sachs who recently introduced its own online lending platform.  Needless to say, LendingClub’s $1.91 billion market cap can’t match the Wall Street powerhouse.

Shares of LendingClub ended the day lower by 7.25 percent at $4.99