Brian Zwerner of Kensington Blake Capital Discussion on Changes Hitting the Marketplace Lenders

May 28, 2016

Kensington Blake Capital’s Managing Principal Brian Zwerner serves as a Senior Advisor to Provider Web Capital, a leading finance provider for small businesses in the healthcare sector.  Zwerner provides commentary on changes affecting the marketplace lenders.

The revelation that Lending Club pushed out its CEO and founder Renaud Laplanche has rocked the marketplace lending and FinTech worlds.  Laplanche was fired due to lack of disclosure of his interest in a fund that purchased loans from Lending Club and also for lack of controls around loans sold by Lending Club to the investment bank Jefferies.  That Lending Club felt the need to take such drastic steps to oust their founder who meant so much to the company and the marketplace industry as a whole has raised concerns about the viability of both.

After the news broker, shares of Lending Club plummeted.  The share price dropped from just over $7.00 pre-announcement to a low of nearly $3.50.  Shares have rebounded somewhat as Lending Club is working to secure buyer for their loans, but the damage has been done.  A number of buyers have announced that they have put on hold their purchases of loans from the company, and these buyers may never come back to Lending Club.  For a company fully dependent on outside capital to fund its origination, they may be faced with no choice but to sell the company to someone with a balance sheet.  Whether that eventually buyer is a bank, another non-bank lender, or a hedge fund, Lending Club’s future as an independent company is definitely in jeopardy.

The turmoil at Lending Club has rocked the entire marketplace lending industry.  If the largest player in the market can have these types of problems, then everyone else in the industry is suspect.  OnDeck saw their stock price drop a similar amount, and they are not even involved in the consumer loan space like Lending Club.  OnDeck only makes loans to small businesses, and their model is primarily a balance sheet model.  The Lending Club problems have clearly impacted the market.  How this situation resolves itself will determine the future of the industry.

Link to article from Wall Street Journal article on Laplanche’s firing:

http://www.wsj.com/articles/lendingclub-ceo-resigns-over-sales-review-1462795070

Link to article from Reuters on Laplanche’s ouster:

http://www.reuters.com/article/us-lendingclub-results-idUSKCN0Y01BK

More information on Provider Web Capital:

www.providerwebcapital.com/introduction

 

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