BTIG Still Buying LendingClub, But Cuts Price Target More Than 50% To $9

LendingClub Corp LC unexpectedly announced the departure of founder and CEO Renaud Laplanche, along with the termination or resignation of three other senior managers. BTIG’s Mark Palmer reiterated a Buy rating for the company, while slashing the price target from $21 to $9.

LendingClub disclosed the sale of ~$22mm in non-prime loans. This sale was to a single investor in March and April “that were not consistent with that investor’s stated criteria for purchases,” analyst Mark Palmer stated.

The CEO resignation followed an internal review of the non-prime loans sale as well as an “unrelated lack of disclosure about personal interests in a third-party fund in which LC had been considering an investment,” which was uncovered during the review.

Impact On Shares

While expressing concern regarding “the circumstances surrounding Laplanche’s resignation,” Palmer mentioned that LendingClub’s shares now reflect expectations that are extremely low in view of the company’s leading market position and robust cash balance.

LendingClub had $868mm in cash as of March 31, equivalent to $2.13 per share, which translates to about 46 percent of its share price, the analyst noted. He added that the company could use this cash for additional share buybacks, especially since the incident “appears to have been a one-off.”

Company President Scott Sanborn has been named as the interim CEO, while Hans Morris has been appointed to the newly created role of Executive Chairman.