Upstart Holdings stock slides after $649M deal models for higher delinquencies

May 20, 2022 11:48 AM ETUpstart Holdings, Inc. (UPST)By: Liz Kiesche, SA News Editor28 Comments

Bank loan online banking

alexsl/iStock via Getty Images

Upstart Holdings (NASDAQ:UPST) stock is skidding down 17% in Friday late morning trading after a Wedbush analyst pointed to the AI-driven lending platform adopting a new underwriting model that accounts for higher delinquencies and defaults than its previous model produced.

Wedbush analyst David Chiaverini said bond-rating agency Kroll issued on Thursday a presale report for a $649M pending securitization of Upstart (UPST) loans. Other takeaways from the KBRA report include: base case loss expectation of 18.7% for the newest deal increased from 15.5% for the previous securitization that Goldman Sachs closed; and Kroll didn't provide issuer ratings on the class B and class C notes for the deal.

"Most deal metrics indicate that the ABS (asset-backed securities) market is getting more difficult," Chiaverini wrote in a note to clients. "The prior GS deal included an OID (original issue discount) of 1.50% to noteholders, which indicates that credit buyers that sold into that deal may have done so at a discount to par, which calls into question the future appetite of those buyers," he said.

As Upstart (UPST) is a relatively new company its underwriting model "has yet to be battle-tested," he noted. "The biggest risk to Upstart (UPST), in our view, is its reliance on third-party funding, and this risk tends to become exacerbated during recessions."

The company went public through an IPO in December 2020. The company was founded in 2012.

Earlier this month, Upstart (UPST) stock plummeted after analysts downgraded the stock, with a major concern being the amount of loans the company retained on its balance sheet.

Recommended For You

Comments (28)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.