Investors were left licking their wounds as LendingClub dropped like a
rock boulder last week. That’s when news got out that the firm’s CEO was leaving. The company explained away Renaud Laplanche’s departure with 2 reasons: 1) a mispricing/mislableing of a series of loans sold to Jeffries and 2) an undisclosed equity position in a fund buying LendingClub loans after LendingClub itself invested in said fund.
Last week, we described and summarized much of the fuss going on at LendingClub. As the public is internalizing the news, the media is left trying to really understand what happened.
Here are some surprising things about LendingClub that are worth noting:
[caption id="attachment_7412" align="aligncenter" width="547"] via Crowdfund Insider[/caption]
1) LendingClub was testing loan drones - seriously? The company was rumored to be testing a loan drone — an unmanned aerial vehicle. The idea was that a remote-controlled vehicle like this could deliver wads of cash to borrowers directly to their homes within minutes or hours after being approved for a loan. Seriously?! Well, the firm’s (now ex-) CEO displayed a panache for this type of spectacle when he helicoptered in cash on attendees using a similar device at the Lendit Conference last year.
2) Jim Chanos, who called Enron, was short the stock: Jim Chanos, who predicted energy trader Enron’s collapse, just happened to be short LendingClub stock when it cratered. When interviewed why he was betting against the company, Chanos famously said, “We had problems with the model.” With the stock down close to 50% in just the last 30 days, we’re left wondering whether Chanos has closed out his trade or if he continues to see further downside to the shares.
3) Did an investor rat LendingClub out to the Department of Justice? The firm received a DoJ grand jury subpoena on May 9th, according to the company’s earnings report, the same day that the company announced the resignation of its CEO. Sean Murray found this to be funny timing because essentially, in spite of the best explanations the company gave regarding Laplanche’s exit, there still doesn't seem to be a smoking gun. He conjectures that the triggering of the legal interest in LendingClub could have come from an investor (in this case, Jeffries itself) that tipped off the Department of Justice.
4) What’s LendingClub going to do now, buy back shares? The leading marketplace lender has been through a lot. With its back up against the wall, Gillian Tan analyzes the firm’s best options. While there may be some suitors out there looking to acquire the leading player in marketplace lending, she doesn’t think that will happen just yet. Instead, expect the firm to put to use the $600+ million it has in the bank to buy back its shares at currently distressed prices.
Even if the company decides that going alone isn’t its optimal strategy, a buyback may make sense. “Such a move would further reduce the number of LendingClub shares on issue, meaning that if the board decided a sale was the best option for the company, potential suitors would be compelled into paying a higher premium for its equity, ” she wrote.
5) Lending Club’s sailboat racing program set records
Lending Club’s second boat (there are 2?!), a 105 foot trimaran named Lending Club 2, broke a world speed sailing record in 2015 when it sailed across the English Channel from Cowes to Dinar. It took Renaud Laplanche’s crew 5 hours and 15 minutes, traveling at an average speed of 26.36 knots, to complete the race, beating the previous record of 5 hours 23 minutes rather handily. The team apparently beat another record, traveling from Newport to Bermuda in 23 hours and 9 minutes. It's possible Laplanche picked up his penchant for sailing when he sold his last company to Larry Ellison's Oracle -- famous for their racing exploits.
Perhaps if the company ran as tight a crew on shore as it does on the water, it would still be smooth sailing for the leading marketplace lender.
Image from LendingClub