LendingClub's 'Market Place' Funding Model Might Be Broken

Shares of LendingClub Corp LC were trading down more than 27 percent on Monday, following the announcement of the resignation of the company’s CEO and Chairman, Renaud Laplanche. The departure, along with two other senior executives, came after news about the company having misplaced the sale of $22 million in loans, and re-dated another $3 million in loans.

Following these events, analysts at Sterne Agee CRT downgraded the stock from Neutral to Underperform, while trimming their price target from $8.00 to $5.00, seeking to better reflect their previously expressed concerns over “the durability of the company ‘market place’ funding model.”

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

According to a report, anaysts at Sterne Agee CRT have been, for some time now, worried “about the ability of the market place to absorb the $6-8 billion in new funding required to meet the company growth plans,” and the fact that funding declined in the first quarter did nothing but exacerbate these concerns.

However, the analysts concluded, “The issue is not over the particulars of the financial issues highlighted the company or the ability of the company to sustain funding at or around current levels, but on the ability of the company to continue to grow the size of its marketplace funding in the face of an already stressed market.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.