LendingClub Falls Below IPO Price After Six-Month Slide

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LendingClub Corp. surged in the days after its trading debut six months ago amid expectations that its online model for making and funding loans would usher in a new era of banking. It’s had quite a comedown since.

Shares of the company closed Monday at $14.54 in New York, a 50 percent drop from the December peak. It was the first time they fell below their initial public offering price of $15.

LendingClub pioneered a way for investors to fund personal loans to strangers over the Internet. Often called a peer-to-peer lender, the company has expanded swiftly as Wall Street and other big investors poured money into the debt. The firm’s growth has inspired competitors and raised questions about whether regulators will clamp down on the model.

“I don’t think people had really dug into some of the underlying risks,” said Michael Tarkan, an analyst at Compass Point Research & Trading LLC. In the run-up to the share sale, investors “were really thinking about the growth.”

Tarkan is among four analysts tracked by Bloomberg who have a sell rating on the company. Another six recommend buying the shares and six have hold ratings.

Other peer-to-peer lenders like Prosper Marketplace Inc. and a site run by Marlette Funding LLC have been growing quickly, too. Goldman Sachs Group Inc. is developing its own online lending effort and said in May that it had hired the head of Discover Financial Services’ U.S. cards division to help lead the initiative.

Market Value

LendingClub raised $1 billion in a December IPO, the first for a peer-to-peer lender. The event was heralded as a watershed moment for the industry because it showed how entrepreneurs were using technology to change the way consumers and businesses access credit.

The initial surge in Lending Club’s shares briefly lifted its market cap above $10 billion -- more than H&R Block Inc. The peer-to-peer lender is now valued at about $5.4 billion.

While LendingClub has continued to expand quickly, investors were underwhelmed by a revenue forecast it gave in February, which was later raised. The company charges origination and servicing fees on the loans it arranges and reported $81 million in operating revenue in the first quarter. It posted a net loss of $6.4 million in the period.

On Deck Capital Inc., which lines up small-business loans over the Internet, has also had a rocky start as a public company. Shares initially surged after its December IPO, then closed below the $20 offering price for the first time in January. The company slipped 8.6 percent to $11.44.

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