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TechCrunch: Lending Club's Selloff A 'Perfect Storm'


Despite a business volume that has multiplied to twice its size in the last 12 months, LendingClub Corp (NYSE: LC) is down more than 16.5 percent year-to-date.

Even more puzzling is the positive net income the company has experienced and the year-over-year picture, with the stock down almost 54 percent.

These disparities have not gone unnoticed, and TechCrunch's Mike Lobanov dove head first into theorizing why the share price has continued its descent.

In an article out Thursday, Lobanov outlined how, while Lending Club is the clear leader in the P2P lending space and against the backdrop of the aforementioned positive figures, "the share price fall has many causes that exist far from the company's performance indices."

Plausible Reasons For The Selloff

Lobanov proposed three reasons that could justifiably lead to investor wariness and ultimately an exodus from the stock:

1. Broad Distrust Not only has the reputation for peer-to-peer lending been tarnished abroad following the reveal that one of China's most popular platforms was nothing more than a Ponzi scheme, but here at home, Lending Club in particular has suffered from an onslaught of investigations from legal companies regarding the company's transparency.

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Lobanov was quick to mention, however, that he feels these catalysts for the selloff are unlikely to be long-term concerns. "In my opinion, such investigations against Lending Club […] will carry no long-term threat to the company business, and, in the end, lead nowhere […] Nevertheless, the news, again, had a significant negative impact on Lending Club share price."

Regarding the China fraud, Lobanov was likewise optimistic toward Lending Club's resilience, "[F]or companies like Lending Club, Prosper or Funding Circle, the risk of fraud is much lower thanks to a much more sophisticated regulatory environment."

However, one final cause of expansive distrust is the distrust in the sector itself. "Overall, most fears about the company and the P2P sector are actually farfetched," Lobanov claimed. "[I]n the course of time, and with growing understanding of the sector by an increased number of investors, these fears will be allayed."

2. Santander's Exit Santander, a bank that previously purchased roughly a billion loans through Lending Club's platform, recently publicized its exit from the company. As explained by Lobanov, "It appears that Lending Club loans are OK, but the bad taste still lingers, and Lending Club Shares were impaired, despite the fact that nothing bad has happened."

3. Interest Rates With the interest rate hike, it's no surprise that Lending Club has subsequently raised its interest rates on some loan grades. Of the two interest hikes made internally by Lending Club, one was directly attributed to the Federal Reserve rate, and the other "to assess loan risks more precisely."

Lobanov pointed out, however, that investor fear following these actions was partially unfounded, "That caused another 7 percent drop in Lending Club share price, although there is nothing to be afraid of as the loans actually perform as they should." Lending Club even circulated a clarification regarding the events, but Lobanov believed it did little to stymie investor sentiment.

It's Just A ‘Perfect Storm'

Based upon Lobanov's explanations for the multiple selloff catalysts, he concluded that the selloff is more of a piling stack of mini-issues rather than any substantial issues. And while, unfortunately, these micro-events have come to negatively impact Lending Club currently, their permanency is unlikely.

"In my opinion, we can expect another year of considerable growth of business volumes and capitalization for such companies as Lending Club, Prosper and other P2P platforms. However, recent events have just led to a perfect storm, impacting the share price of one of the P2P sector's leading stars."

At time of writing, Lending Club was slightly up on the day by 0.55 percent at $9.21.


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