OnDeck Capital Skyrockets Nearly 40% After Confirming Partnership With Mega-Bank

Shares of OnDeck Capital, an online platform for small business lending, surged higher by nearly 40 percent early Wednesday morning after the company detailed a new partnership with mega-bank JPMorgan. As part of the new partnership, OnDeck will offer small-dollar loan products (typically less than $250,000) for JPMorgan's small-business customers. The loans will be marketed under JPMorgan Chase's brand and is consistent with the bank's ambitions to build its small-business unit. OnDeck stated in an

that the small business lending market is "massive" and "underserved." The company noted that it's current loans under management is just $0.8 billion. Meanwhile, the total business loan balance under $250,000 in the US (as of the second quarter) was $186 billion and there is an estimated $80 billion to $120 billion in unmet demand for small business lines of credit.

In a brief note to clients, Christopher Brendler of Stifel stated that even though OnDeck's partnership with JPMorgan is in the "early stages" it represents a "major positive" for OnDeck's stock. Brendler added that his prior positive view of OnDeck has been based on his belief that the company's leadership position in small and medium business lending would "position it as a partner of choice" for a key strategic partner such as banks and merchant acquirers. "With JPMorgan a clear leader in both segments, we think this relationship could have a material positive impact on OnDeck's growth trajectory," Brendler wrote. "In addition, we think this partnership could help diffuse some of the market's skepticism regarding the OnDeck franchise." Brendler maintained a Buy rating and $17 price target on shares of OnDeck.