P2P Lending News » Deals

LendingClub Proposes New Structure in S-1 Filing

P2P Lending News — Sun, 22 Jun 2008 00:12:59 +0000

LendingClub has filed an S-1 with the SEC, in which it proposes a new regulatory structure for person to person lending, as well as providing some interesting data about the company itself.

The proposed regulatory structure describes a model in which LendingClub issues loans directly to borrowers, and rather than selling the promissory notes to lenders, sells securities to lenders which are dependent on the repayment of the original loan. It’s a model which may placate the SEC’s need to regulate the sale of notes to investors, and would have some benefits to LendingClub, too. As the owner of the promissory notes to the borrowers, this structure allows Lending Club to fully control collections, including initiating legal proceedings against borrowers and offering settlement packages.

It is an S-1, after all, the same document that companies file when they sell shares of stock as securities (i.e., when they go public), so LendingClub’s filing with the SEC includes some concerning facts about the business as well, specifically:

LendingClub has been funding loans as a lender on their platform. Unlike Prosper, Zopa, and other P2P lending marketplaces, Lending Club has actually used $7 million of their own money (or, more accurately, borrowed money) to jump-start activity on their site.
The company has raised an additional $3.6 million in an arrangement where accredited investors have fronted the money as a 3-year loan at 12% interest (that makes LC a B-grade borrower, according to their own underwriting criteria), and will also receive preferred stock at the price of $10 per share.
Despite the injection of $3.6 million, Lending Club is burning through money at a good clip. During FY2008, the S-1 reports, LendingClub had a net loss of $7.0 million, and an accumulated deficit of $7.8 million since inception.

It’s unclear whether, given their financial situation, LendingClub will be able to hold on through approval from the SEC. Going public is one thing, but creating a brand-new regulatory structure and getting it approved by a large bureaucracy during a lame duck presidency will be tough.

Zopa announces launch of Zopa Japan

P2P Lending News — Fri, 07 Mar 2008 23:07:16 +0000

Social lending juggernaut Zopa announced today, on its third birthday, that they will open a P2P lending site in Japan, the world’s second largest economy. The joint venture, Zopa Japan KK, will be led by finance veteran and chairman Takeshi Yoneda and CEO Tatsuya Kuboi.

No date has been set for the site’s launch, but Zopa follows American P2P lending company Prosper, who announced a joint venture with SBI Holdings to launch a Japanese site in August 2007. During 2007, Zopa launched sites in both the United States as well as Italy.

Prosper in joint venture with SBI Holdings for Prosper Japan

P2P Lending News — Mon, 06 Aug 2007 09:42:07 +0000

In a press release Monday, Prosper announced a joint venture with Japan-based SBI Holdings to expand the Prosper brand into the Japanese and other Asian markets through SBI Prosper. The terms of the deal were not disclosed.

Hayato Kameta has been picked to become CEO of Prosper Japan. Regulatory and technical integration hurdles remain before the site can be opened to the public. No word was given on when the new site might launch.

SBI is a spin-off of Softbank, the Japanese investment behemoth from Web 1.0 days, and has made a business of running copycats of American web sites such as E*TRADE, Morningstar, and InsWeb. Chris Larsen, CEO of Prosper, orchestrated a similar Japanese joint venture with SBI for his previous company, E-LOAN.

Virgin USA acquires CircleLending, enters US banking market

P2P Lending News — Fri, 18 May 2007 04:49:47 +0000

CircleLending, the Massachusets-based facilitator of P2P loans, announced on May 15 that Virgin USA, the North American investment arm of Virgin (the UK-based Richard Branson company) had acquired a majority stake. Terms of the transaction were not disclosed.

CircleLending hasn’t been included in the discussion here in the past because, although they do facilitate loans between people, they only facilitate loans between people who already know each other… how droll. In August 2006, they raised a $10 million B round of venture capital from Venrock Associates, Intel Capital, and Omidyar network (who has also participated in funding Prosper).

This acquisition by Virgin can be seen two ways. First, it could just be an opportunity for Virgin, who runs Virgin Money in other countries, to get a foothold with an established (yet small and malleable) financial services firm in the US so that they can start offering their own products. Or second, it could be seen as validation of CircleLending’s model and Virgin’s desire to infuse some capital and marketing and make P2P lending a profitable business in the US.

I take a cynical view of this acquisition (i.e., option 1), and suspect that Virgin will keep the P2P loans bit as a side business, but otherwise just open a US version of Virgin Money. Virgin Money is described on the Virgin corporate site as “Awesome credit cards, no nonsense loans, switched on savings… and then some. Sweet.” We’ll see if that type of brand appeals to Americans, which I imagine will start in the Boston area, where CircleLending is based. They might want to change that “Sweet” to “Wicked pissa,” though.