LendingClub IPO – Peer-to-Peer Banker Valued at $5 Billion

LendingClub, which is the first peer-to-peer online banker to go public, was recently priced at $15 per share. The $15 per share number is above the high end of the predicted price range of $12-14. The IPO raised about $860 million, which implies a company valuation of $5.4 billion. The stock should be debuting this Thursday on the New York Stock Exchange and will be watched closely as it’s the first company of its kind to go public.

LendingClub is an online peer-to-peer banker, which means that it lets investors lend directly to individuals and business all through its proprietary online platform. Lending Club has a very unique business model, its advantage is that it doesn’t have all the overhead of a traditional bank so it can offer loans at lower rates and give investors higher returns by earning a smaller margin on loans than a traditional bank. LendingClub boasts on their website that they save borrowers an average of 30% on their interest rates, which appears to be highly compelling. On the investor side, you are able to select individual loans that are at pre-set interest rates based on the borrower’s credit profile. The company makes profit by taking fees for a variety of different banking functions from both the investor and borrower; the company’s profit comes primarily from its loan origination fees.

It will be interesting to see the performance of LendingClub going forward and the effect it has on traditional banks, as it does have a significant operating advantage over traditional lenders.

-- Radi Sultan