Peer To Peer Lending is going main stream as San Francisco-based Lending Club, the biggest p2p lender in the world with more than $6.2bn worth of loans made through its platform (this is three times the amount of its closest rival, Prosper) seeks to raise at least $650m by IPO at $10 to $12 per share. This would translate into a mid value at about $4bn for the company.
Trading for more than eight years now, Lending Club’s business model is based on using advanced computer algorithms to match those seeking money with those willing to provide it. High-quality credit customers, with FICO scores starting at about 660, can borrow up to $35,000 at interest rates averaging 14 percent. The IPO roadshow is targeting the big end of town, including the investment arms of some of the very banks which might find their lunch being eaten.
Setting the right price is of course a problem as it is the first cab off the rank, but if successful, it would mark an important step in the evolution of P2P, and competitors like Prosper Marketplace and the small business specialist On Deck Capital, could follow suite.
At a time when the traditional banks are finding it hard to lend to some small borrowers, thanks to capital pressure, and legacy infrastructure, P2P may look an attractive alternative to borrowers and investors a like. Whilst the company began with personal loans, targeting borrowers looking to refinance credit card debt with high interest rates, it has moved into other offerings. Small businesses can now borrow up to $100,000 through the platform and recently, the lending platform unveiled a new two-year “super prime” loan enabling customers to borrow up to $10,000.
Lending Club already has the backing of some of the biggest names on Wall Street and in Silicon Valley. Its board includes Lawrence H. Summers, the former Treasury secretary; John J. Mack, the former chief executive of Morgan Stanley; and Mary Meeker, the venture capitalist and onetime star Internet analyst. Its existing investors range from Google, the venture capital firm Kleiner Perkins Caufield & Byers and the mutual fund giants T. Rowe Price and Black Rock. According to the prospectus, only three of the company’s existing investors plan to sell in the initial offering. Lending Club will list on the New York Stock Exchange.
According to the FT:
The p2p sector’s growing partnership with Wall Street has been a sensitive topic for the industry, with some keen to downplay the role of professional investors in their growth. Lending Club recently changed the way it hands out data on its platform as it seeks to level the playing field between professional and retail investors.
Prosper and Lending Club have also installed electronic “speed bumps” in an attempt to stop sophisticated investors from snapping up the most attractive loans.
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