Prosper Relaunches with SEC Approval, Secondary Market
After nine months of downtime, Prosper, the first American P2P lending company, re-opened its doors this afternoon, with a blog post by CEO Chris Larsen claiming “we mean it this time“. And they do — Prosper’s loan marketplace is now blessed by the SEC, and open for business. Prosper has also opened a secondary market, operated through Folio Investing, so that lenders who already hold notes can sell them to others.
Now that the quiet period is over, Prosper finally provides some details about what was holding up their S-1 registration with the SEC. Although they had to give up on the “open market” concept, Prosper seems to have gone to the mat and convinced the SEC that an auction pricing model was critical to the marketplace. According to the launch blog post, “the SEC has never permitted Wall Street investment banks or any other institution to run a true auction where investors could make an irrevocable bid that committed funds prior to the establishment of a final rate.” In past auction-priced sales, such as Google’s 2004 IPO, bids could be cancelled at any time before the final price was set. Prosper is hanging its hat on its auction model, which, at this point, is the main differentiator between Prosper and Lending Club.
Although there are not yet any new listings, Prosper’s marketing team has been hard at work, with a new name, “Prosper, The Loans Marketplace” (grammar is so complicated), a matching logo, and a highly-publicized Twitter account @prosperloans (@prosper was taken). Prosper has replaced the press links on the home page (to gushing articles from major media outlets) with links to Facebook, Wikipedia, and most confusingly, Yelp, where Prosper has 3 reviews, 2 of which are 1 star (the lowest rating).
As for the site itself, not many changes are evident since the first re-launch in April. On the borrowing side, borrowers from all states except Iowa, Kansas, Maine, and North Dakota are able to borrow. The minimum credit score for borrowers has been raised from 520 to 640.
On the lending side, lenders may only participate from California, Colorado, Delaware, Georgia, Illinois, Minnesota, Montana, Nevada, New York, South Carolina, South Dakota, Utah, Wisconsin and Wyoming. If they qualify, lenders are asked to re-sign all six(!) of Prosper’s legal agreements, after which they may be presented with suitability requirements (depending on their state of residence). In California, lenders are required to have a gross income of $85k or a net worth of $200k if they plan to invest more than $2,500 on the site.
Lenders who want to trade notes must sign up as a Folio Investing customer, after which they may sell any notes by putting them up for auction.
Related posts:
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Prosper recently filed a fourth amendment to its regulatory filing with the SEC. This new revision of the peer lender’s S-1 has removed the concept of “Open Market... - Lending Club Raises Rates, Prosper Pushes Auction Model
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So, when will it be available in all states, particularly Ohio?
Based on my research, it’s not looking real promising for Ohio and some others. I have been tracking Prosper 50 State Progress, states by state, for some time.
Most states could easily approve the secondary market where lenders buy or trade existing notes via FOLIOfn because the platform parallels well understood traditional schemas. Approval of the primary Prosper platform where the securitized notes (loans) are created is another matter. Lenders in a number of states, Ohio and my own included, will need to poke-n-prod their state’s regulators and legislators repeatedly before they are allowed to participate on the ‘new’ Prosper. Wish me luck! You too!