Lending Club chooses NYSE for IPO

Lending Club, the world’s biggest website for matching borrowers who need small loans with investors, will make its public market debut on the New York Stock Exchange — the same exchange where many of the banks the startup is vying to disrupt also trade.

In an updated financial filing Monday, San Francisco-based Lending Club disclosed that it plans to list shares from its forthcoming initial public offering on the NYSE under the ticker symbol “LC.” The company filed for an IPO in August, and said it would aim to raise $500 million. However, that number is likely offered as a placeholder to determine fees and the amount Lending Club actually raises could easily top that — it is expected to be one of the largest deals from Silicon Valley this year. At $500 million, Lending Club’s deal would be the biggest from the region this year, beating action sports camera-maker GoPro’s $427.2 million IPO in June.

Most tech companies choose to list on Nasdaq, although there have been exceptions — Twitter went public on the NYSE in 2013 and most recently Alibaba listed on the exchange for its record-breaking $25 billion debut.

Rather than making loans directly, as a bank does, Lending Club functions as an Internet marketplace, connecting borrowers whose creditworthiness it evaluates with investors who decide whether a particular borrower is worth their risk. The investor, who might be a financial institution or simply an individual, then has a connection with the borrower, lending the money and receiving payments through the Lending Club web platform. The company believes that the traditional bank mortgage lender and many of the brick-and-mortar bank services will soon be replaced my cheaper and more efficient technology.

“We believe that traditional banks have higher fixed costs of underwriting and servicing, are ill-suited to meet personal and small business demand for small balance loans and have instead relied heavily on issuing credit cards, which require less personalized underwriting and have higher interest rates,” the company said in its prospectus.

Lending Club, which has facilitated more than $5 billion in loans since launching in 2007, has been a pioneer in online lending, opening the space up for other smaller but successful companies such as Prosper Marketplace, CircleUp and Upstart.

Lending Club also disclosed in the updated filing Monday that it intended to reserve some of the shares sold in the IPO for investors who use the platform. So, banks, high-worth individuals and average mom-and-pop investors who have lent money through the site will have a chance to buy some of the shares.

There is no word yet on when Lending Club will price and begin trading; the volatile market, which has suffered wild swings over the last few weeks, have companies on edge. Last week, the Dow Jones saw its worst day in more than a year and the S&P 500 had its worst day in two years.

Last year, Lending Club company made $98 million, three times its revenue in 2012 and nearly eight times its 2011 revenue. Yet despite turning a $7.3 million profit in 2013, Lending Club posted a $16.5 million loss for the first six months of this year. An average of 3.29 percent of Lending Club borrowers default on their loans, most of which can have an interest rate of about 6 percent up to 24 percent.

 

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