
LendingClub Files for $500M IPO - juneyham
http://techcrunch.com/2014/08/27/lendingclub-files-for-500m-ipo/
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jliptzin
I have had a LC account for about 4 years. The returns aren't that great,
around 6%. I did some random loans of mixed interest rates, but have also
applied my own set of filters which brought the rate up a little bit over the
last year.

The notes are also not liquid. You will suffer huge losses if you need to
sell. I thought this would mean that I could get other people's notes at deep
discounts...typically sellers want to offload late notes to avoid a full loss.
However, in my test of buying about 30 late notes, I discovered the real
problem - if a borrower makes a payment on your note while the transaction is
still "settling" (typically 24-48 hours after you purchase the note), the
transaction is cancelled. You can't cancel the transaction during the settling
period if no payment is made though. So, what ended up happening was I was
building a portfolio of junk notes that defaulted 98% of the time - the
advantage is definitely with the seller and I suspect that is why there is a
huge lack of buyers on their platform.

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obvious_throw
6% returns in a ZIRP environment are actually quite fantastic. Even junk bonds
yield less than that.

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AjithAntony
But there is a market for junk bonds. You could exit your position today if
you want.

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bsims
A part of this article is false.

"LendingClub doesn't loan out its own capital and collects fees of loans that
are originated on its platform from both individuals and more sophisticated
investors alike."

Lending Club owns a subsidiary fund that invests in the platform as well.

Investors should be aware that LC is both a platform, and an investor in it's
own platform which, if not monitored closely, can be potentially dangerous.

[Source] [http://www.prnewswire.com/news-releases/lending-club-
announc...](http://www.prnewswire.com/news-releases/lending-club-announces-
additional-investment-in-lc-advisors-fund-from-peter-thomson-163005206.html)

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pmorici
I don't think it is. The subsidiary you are talking about LC Advisers isn't
using LC's own capital. It is a vehicle that manages investments from
institutional investors.

As LendingClub has grown it has transitioned from a purely P2P model where
individuals made the majority of the loans to a whole loan model where banks
and other accredited institutional investors make up the majority of the
loaned capital. They still have the original platform but their growth isn't
coming from Joe off the street it's coming from big banks etc... who see this
as a cheaper way to do underwriting.

~~~
bsims
Agreed on the institutional side. However LC also invests in their own loans
from time to time, both directly or through LC Advisers.

In the early days LC invested their own capital more heavily to make sure
loans were fully funded, and to ensure the community was active enough.

This is why they have "funded_amnt" and "funded_amnt_inv" to denote how much
of the loan was funded by investors vs. internally.

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akg_67
LC no longer invests any significant amount of own money in loans. See
[https://www.peercube.com/blog/post/11](https://www.peercube.com/blog/post/11)
for the analysis. IMO, it is negative that LC no longer has their own skin in
the game as their interests are no longer aligned with lenders on their
platform. Most of the recent policy changes, for example loosening the credit
quality and charging lenders to pay for collection and charging lenders for
first few days of interest to LC's loan originator, seem to reflect this
dissociation.

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cm2012
Everyone I talk to has had good experiences with lending on lending club. Has
anyone here had a bad experience?

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rtanaka
I spent a lot of time handpicking my 200 investments and I'm sitting on a
12.23% (adjusted) return right now. I think by most measures, this would
qualify as a good experience. For me though, it's not. When someone defaults
on me (I've had 1 officially and 2 more that will likely get charged off soon)
I feel bad about it. Yes, it's expected and yes, LC makes a reasonable amount
of effort to collect but it doesn't help how I feel. Especially when the
people filling out the loan application write things like, "I'm a hard worker.
I always pay my loans back, etc, etc" As someone, that would never short
change someone on money owed I feel very let down when it happens to me and I
take it a little too personally. It also doesn't sit right with me that LC
takes a cut of every payment but doesn't share the pain of losses in any way.
What it boils down to, I suppose, is that LC is just not the right investment
vehicle for me.

edit: correcting default stats.

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AjithAntony
How long have you held these notes? That seems like an exceptionally high
return, and low default rate, unless this is like your first year.

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rtanaka
I started in January of this year. It does seem high for sure. I'd like to
think I spent a lot of time finding people that had the most to lose when
making a decision (mortgage, relatively high income, stable job, etc) to lower
my risk. But who knows.

edit: so i just checked for real. looks like it's been over a year (time
flies). for the record, it shows 199 (instead of my stated 200) because i put
$50 into one investment instead of the standard $25.
[http://i.imgur.com/o2DdDLU.png](http://i.imgur.com/o2DdDLU.png)

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AjithAntony
> i put $50 into one investment instead of the standard $25

It's funny you mention that. I went through a phase where I started doing $50
and $100, becuase I couldn't find enough high quality borrowers. I figured
that since I trusted these people with $25, why not a little more. It just
hurts more when they default. When I see a high value note charged-off, I just
feel more betrayed than usual.

~~~
pmorici
I think that's one of the mistakes people make when investing in LC. The
safety of the investment comes from having a small amount invested in a large
number of notes. Until you are invested in 800+ notes you shouldn't be
investing more than the minimum in any one note. If you look at LC's
statistics on investor returns 800 notes seems to be the magic number to
amortize the default risk.

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gtremper
I've been meaning to finish my LendingClub machine learning underwriter.
There's a lot of data to train on since all historical loan data is available.

The exact model to use is tricky though. You could train a classifier to
detect whether a loan will default or not, but this doesn't weigh the chance
of default with the interest rate. I then thought of doing a regression on the
expected return, which would properly balance between interest rate and
default rate. At some point, though, you need to make the binary decision of
whether to invest in the loan or not, again classification.

Another complication is that since LendingClub has been growing exponentially,
the majority of the loans they've issued haven't matured yet. Utilizing this
partially complete data is even more tricky. You could ignore non-mature
loans, but that would reduce your training data significantly and make your
data at least 3 years old.

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chriogenix
I've been investing in lending club for 4 years. Returns on different loan
filters vary from 6%-13% on the high end. You're going to have defaults. When
I try to explain this investment vehicle they look at me skeptically. Its a
great place to invest risk capital as you'll get a semi decent return on your
cash but I definitely wouldn't invest anything you can't stand losing. It will
be interesting to see how the IPO turns out.

Check out lendingmemo.com and lendacademy.com for more insight on how to
invest properly in the platform.

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akg_67
I opened Lending Club account little less than 3 years ago. Lending Club
reports my adjusted returns to be 9.91%. I currently have 300+ notes in my
account though I usually sell notes that are underperforming on the secondary
market typically at loss. I wouldn't invest any serious amount in LC as it is
very new and unproven. Once LC becomes public, they most likely will start
fleecing both borrowers and lenders to make its earnings/revenue numbers. The
changes made this year are pretty indicative of this trend.

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halcyondaze
I really like LendingClub. I was a bit mad at my default rate, as I followed
stringent criteria, but I'm still sitting at 6.5%. I actually had someone die
that I lended to and it really hit home with me for some reason.

The return isn't amazing, but I'm not doing anything else with that capital
right now, and don't care to toss it in a different vehicle right now. It's
fun to use for me.

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guiambros
Same here. I'm getting a 6.03% return. Low, for sure, but at least I get the
feeling that I'm helping a few folks to borrow money, at rates and conditions
that are more reasonable than with traditional banks.

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pktgen
I believe once they IPO, they can accept lenders in all states (currently they
only accept lenders in certain states).

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MIKEMAC972
LendingClub reported $86.9 million of revenue in the first six months of the
2014, up 134 percent.

P2P is fundamentally shifting how people gets loans- banks should definitely
be paying attention.

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cylinder
Banks don't really care about these types of loans. They do their unsecured
individual lending through credit cards. At the retail level they are more
concerned with mortgages, HELOC, high net worth individuals, and
collateralized business lending.

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pmorici
Banks and institutional investors make up the majority of the money being
loaned out. If you look at the S1 filing you will see that something like 80%
of the money being loaned out isn't coming for individuals. It's coming from
banks and institutions.

[http://www.lendacademy.com/forum/index.php?topic=2612.msg225...](http://www.lendacademy.com/forum/index.php?topic=2612.msg22594#msg22594)

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iamchmod
I agree - the notion that LendingClub is P2P is mostly PR hype. Sure an
individual can put some capital to work. But most of their capital as pointed
out above comes from institutions (mostly hedge funds). I had heard that 95%
of their capital was institutional but I can't find a quote on that. P2P gets
fantastic press tho and which in turn drives down new borrower acquisition
cost.

