Lending Club’s historic IPO is probably just days away

Update: The IPO looks to be slated for tomorrow, December 11th. Read more: The New York Times.

In late August, Lending Club filed to become a publicly traded company on the US stock market. After this sort of filing, most companies take 10-12 weeks before they go public, so the IPO was originally set for mid-November. But we’re already into December today and the IPO still hasn’t happened, so many are wondering where things are at.

Despite the delayed IPO, there has been much still springing up around it. Lending Club’s website is the best its ever looked, with its About Us page looking crisp and ready for the public eye. Secondly, Lending Club recently published this amendment (SEC.gov) on Monday, and it was full of interesting details. Most significant of these was their new proposed share price of $10-$12. Michael De La Merced with New York Times had good reporting on the difficulty of pricing a p2p lending company:

“Determining the best pricing for Lending Club’s I.P.O. has been tricky because the company will be in a league of its own. […] No other alternative lender trades on the public markets, meaning that Lending Club’s bankers will have to use otherwise unrelated comparisons like nonfinancial Internet start-ups as benchmarks for the company’s performance.”

Considering they plan to have 361 million shares of common stock outstanding, this would value them at a conservative $4.3 billion. Further, the filing identifies a new goal of raising $800 million via the IPO (see filing below), a 60% bump from their initial filing in late August. It seems Lending Club is feeling more confident with each passing month about this coming huge day.

I am really interested to see how the price potentially grows when the opening bell rings.  An $800 million dollar IPO would place Lending Club in the tier of US tech IPOs right beneath Google and Twitter, which would be a huge validation of this industry and an indication that technology has officially begun to tear down brick and mortar banking.

The Roadshow Materials are Online (and Interesting)

The same day as this amendment, it seems Lending Club also published their roadshow documents (see RetailRoadShow). This roadshow will be a time where the management travels throughout the nation to talk with institutions about making long-term investments into the company. The video is about 20 minutes long, and is highly worth watching, particularly the first half. Renaud Laplanche, Lending Club’s CEO, basically uses the opportunity to outline the marvel that is online lending, focusing on Lending Club’s success within this industry.

Highlights of the roadshow video begin with Laplanche’s almost immediate emphasis on Lending Club’s cost advantage, how much cheaper they operate than the banks considering they use a website instead of local branches. Other great moments are when he mentions Lending Club’s funding of $6B loans vs. the $380B in outstanding credit card debt that matches their borrower standards.

But things get really interesting at the 5-minute mark when he begins to overview where Lending Club could go in future years, namely in addressing the $13 trillion in outstanding debt that the American population holds (business loans, mortgages, etc). Then the camera zooms out to show a map of the world, suggesting Lending Club’s growth is only limited to the breadth of the human race. And all of these plans are delivered in Laplanche’s characteristic calm and thoughtful demeanor; the combination is fascinating.

The video is remarkable, largely because it is the most comprehensive presentation of Lending Club’s current state and future goals that I’ve ever seen. Financials are highlighted by CFO Carrie Dolan in the second half of the video, giving a very intimate breakdown of how Lending Club has become so successful (hint: borrower fees). Perhaps all of this data has been available in SEC filings for years, but I feel it has never before been simplified and strengthened like this.

Two Huge Benefits of the Nation Discovering Lending Club

With the IPO right around the corner, I think it’s probably good to emphasize the main thing this day will accomplish, namely, increased national awareness of peer to peer lending:

#1. More borrowers and investors

A record-breaking IPO for an online lending company has the ability to introduce this young industry to the national population. For years proponents like myself have struggled with how unknown peer to peer lending is within average Americans, the very people who are responsible for its success, so a massive IPO next week could go miles in bringing fresh widespread attention. New responsible borrowers would gain access to low-cost credit and new investors would discover the great returns they could earn by investing in those borrowers.

#2. More platforms could emerge

A Lending Club IPO could encourage other companies to follow in their footsteps, hopefully increasing the number of companies open to unaccredited retail investors like myself. Lending Club is just the first of these IPOs, and I know a few online lenders closed to retail who have cited their smallness as a reason for being only open to accredited investors. Fitch Ratings put it like this:

“A successful IPO could act as a catalyst and benchmark for other P2P institutions to pursue IPOs in order to raise capital and/or for investors to monetize their p2p investments. […] These efforts may attract a more diverse set of investors to fund loan growth.”

Secondly, national success of Lending Club could also go miles in encouraging completely new platforms to launch. Certainly all sorts of creative teams exist throughout the US with ideas for new and interesting lending companies, and this IPO could help them find venture capital.

IPO Likely to Happen On (or Near) December 10

Businessweek did a great job overviewing many of these recent changes, and cites December 10 as the likely date of the IPO. Their guess corroborates with the date seen in the roadshow materials above.

I’m personally requesting 25 shares of stock

Lending Club investors had a chance to pick up shares of the IPO if they chose to, as offered through an email from Lending Club last month. If you’ve opted in (registration is now closed), it seems you can request between 25 and 350 shares through a connected Fidelity account, though there is no guarantee that you will get the shares you request.

Personally, I will partake in the IPO with everybody else, but am only requesting the minimum shares: just 25. While I very much believe Lending Club has a bright and expansive future ahead of it, I’m not a big believer in accurate valuations of technology companies, particularly during an IPO.

Moreso I am excited to pick up a few shares in Lending Club for the simple experience of being along for the ride. That said, I know a few savvy investors who are very comfortable with the idea of taking on equity in this company from day one, so everybody is different.

What about yourself? Are you considering a purchase of stock in Lending Club?

[image credit: Free-Printable-Calendar.net “December 2014” CC-BY 2.0]