Lending Club IPO Won't Break Records, But Will It Make Investors Wealthy?

| About: LendingClub Corporation (LC)

Summary

Lending Club has raised its expected IPO price range to $12-$14.

It plans to sell 57,700,000 shares, at $12 the expected income will be $692 million.

Lending Club is banking on the success of the Alibaba IPO to draw interest.

The company has facilitated loans over $1 billion in 2014, over $5 billion since 2007.

Lending Club boasts even steeper growth than Alibaba.

If it were not for the Alibaba IPO in September, Lending Club would be the break out tech IPO of 2014. The world's biggest peer-to-peer (P2P) lending company won't set any monetary records with its IPO, but only because the debut will be monetarily smaller when compared with the Alibaba public offering.

Lending Club's IPO is now expected to be priced between $12 and $14 per share, up from last week's estimate of $10 to $12. By offering 57.7 million shares, the San Francisco based lending company expects to raise as much as $800 million. Pricing will be finalized the day before the IPO becomes public under the ticker "LC."

Lending Club has facilitated loans over $5 billion since it was incorporated in 2007. In 2014, the company funded loans over $1 billion. This has allowed the company to generate $87 million in net revenue during the first half of 2014. This is $50 million more than during the same period in 2013.

According to analysts at Sterne Agee, Lending Club boasts even steeper growth than Alibaba and there is "very little" that will slow down the growth of Lending Club's multi-year prime-based installment loans.

In the field of non-traditional lending, Lending Club far outstrips its closest competitors. Prosper, the second largest P2P lender in the country, has only funded $2 billion in loans since it was incorporated, at the same time as Lending Club.

In April, Lending Club sold shares privately to T. Rowe Price Group Inc., Blackrock Inc., Sands Capital and Wellington Management Company to fund a $140 million purchase of Springstone Financial LLC. Springstone Financial loans money for private school tuition and elective medical procedures.

The increased use of P2P lenders surged after the 2010 financial crisis as traditional banks have scaled back personal and business lending due, in part, to heavier regulations. These regulations have sent many borrowers to P2P lenders, an industry seeing similar growth to e-cigarettes: an industry also helped by regulation as attested by ecigsopedia.

The success of the P2P model, pioneered and used successfully by Lending Club has caused concern over lost revenues with traditional banks. Profits on lending have decreased as regulations have increased. Small businesses are turning to non-traditional lending at a faster rate than expected.

Lending Club executives have been busy promoting the upcoming IPO over the last month. That is one of the major reasons the price range has increased.

Getting in on the ground floor of this IPO will see investors making money, either through short sales or over the long term. Bank regulations are not decreasing and more people will turn to P2P lending to finance personal needs. More and more businesses have begun turning to P2P lending to raise capital for improvements and expansion.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

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