LendingClub Filed Its 10Q: What To Take Away

Shares of LendingClub Corp LC are down 42 percent since the company disclosed accounting irregularities with its Q1 earnings press release on May 6. Additional details were disclosed in the company's 10Q filed after Monday's close. BTIG analyst Mark Palmer points out the main takeaways from the 10Q filing.

• LendingClub Corp received a grand jury subpoena on May 9 from the Department of Justice
• Capital coming into the platform has slowed, and outside fundraising may be needed while confidence is raised
• Restricted stock was given to senior execs to increase their incentive to stay
• "Significant inducements" may be offered to investors to restore confidence

Related Link: LendingClub CEO Is Out, Shares Tumble 25%

Palmer believes building a strong balance sheet is "prudent" because this will carry through to investor confidence. Further, "The prospect of a new capital raise typically can create pressure on a company's outstanding securities [...] the prospect for new capital that could preserve the optionality of its existing security by extending its runway can result in a more benign reaction from the market."

In Tuesday's pre-market, LendingClub was down 11.20 percent; LendingClub closed Monday's regular session down 0.25 percent at $3.93.