Securitizations Securing the Future - Lending Club Blog
Added on 2022-10-13
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PROBLEM DEFINITION:
Should Lending club securitize its promissory notes to provide liquidity to the investors by al-
lowing to trade in the secondary market?.
RELEVANT FACTS:
French-born Laplanche who had good understanding of calculated risks had founded the Lending
Club to facilitate the peer to peer loans system so that someone who is looking for loans of per-
sonal nature can find someone who is ready to give such loan.("Securitizations Securing the Fu-
ture - LendingClub Blog", 2019)
The 2 major foundation principles of Lending club to facilitate peer lending were :-
a)Lack of time to explore urges people to take loans with higher servicing
b)Technology advancements in the form of social and online community can be utilized for the
purpose to allow people to lend and borrow loans
The club had started in the year 2007 with just 4 employees However, lack of liquidity of these
loans or promissory notes made them less popular than expected. With no secondary market
availability, the parties had to hold the notes for a period of 3 years until the loan gets paid off or
with term ends. ("LendingClub Closes First Self-Sponsored Securitization to Expand Investor
Access", 2019)The club is considering to undergo changes in the product types being offered by
securitizing these personal loans in the form of promissory notes and get them traded in sec-
ondary market. Having said that, the process and the journey is extremely tedious and definitely
not an easy one as Securities and Exchange Commission (SEC) has stringent regulations around
the same. SEC would require the club to be registered if gets involved in issuing securities, cause
as of now it is only looked upon as a facilitator of loans. That would mean undergoing the busi-
ness model changes as well.(Tenebruso, 2019)
ANALYSIS:
As evident from the statements showing the analysis of the four years data below in the Appen-
dix A, B and C, it is clearly evident that the total revenue of the company has significantly in-
creased from the year 2015 to 2018. There has been a drastic increase by approximately 36.4% in
revenues, which is fairly good for an organization’s progress. The price per share of the company
was as low as 0.01 which has met an increase and is currently at a price of 0.15 which is the hike
way beyond the imagination. Irrespective of whatever the current and previous figures and prices
are, the company has largely progressed and seen a lot of ups in the company. In around the year
2006, the company had a standard credit card rate of 15.09% which was useful for providing in-
stant access to its credit customers and allowed to purchase or take the cash advances from any
anybody willing. The company also had a standard rate where the lender was $15-$20 per $100
which was borrowed on the basis of two-week loan.
RECOMMENDATIONS:
Should Lending club securitize its promissory notes to provide liquidity to the investors by al-
lowing to trade in the secondary market?.
RELEVANT FACTS:
French-born Laplanche who had good understanding of calculated risks had founded the Lending
Club to facilitate the peer to peer loans system so that someone who is looking for loans of per-
sonal nature can find someone who is ready to give such loan.("Securitizations Securing the Fu-
ture - LendingClub Blog", 2019)
The 2 major foundation principles of Lending club to facilitate peer lending were :-
a)Lack of time to explore urges people to take loans with higher servicing
b)Technology advancements in the form of social and online community can be utilized for the
purpose to allow people to lend and borrow loans
The club had started in the year 2007 with just 4 employees However, lack of liquidity of these
loans or promissory notes made them less popular than expected. With no secondary market
availability, the parties had to hold the notes for a period of 3 years until the loan gets paid off or
with term ends. ("LendingClub Closes First Self-Sponsored Securitization to Expand Investor
Access", 2019)The club is considering to undergo changes in the product types being offered by
securitizing these personal loans in the form of promissory notes and get them traded in sec-
ondary market. Having said that, the process and the journey is extremely tedious and definitely
not an easy one as Securities and Exchange Commission (SEC) has stringent regulations around
the same. SEC would require the club to be registered if gets involved in issuing securities, cause
as of now it is only looked upon as a facilitator of loans. That would mean undergoing the busi-
ness model changes as well.(Tenebruso, 2019)
ANALYSIS:
As evident from the statements showing the analysis of the four years data below in the Appen-
dix A, B and C, it is clearly evident that the total revenue of the company has significantly in-
creased from the year 2015 to 2018. There has been a drastic increase by approximately 36.4% in
revenues, which is fairly good for an organization’s progress. The price per share of the company
was as low as 0.01 which has met an increase and is currently at a price of 0.15 which is the hike
way beyond the imagination. Irrespective of whatever the current and previous figures and prices
are, the company has largely progressed and seen a lot of ups in the company. In around the year
2006, the company had a standard credit card rate of 15.09% which was useful for providing in-
stant access to its credit customers and allowed to purchase or take the cash advances from any
anybody willing. The company also had a standard rate where the lender was $15-$20 per $100
which was borrowed on the basis of two-week loan.
RECOMMENDATIONS:
The club should register with the SEC under S-1 and S-2 as the market for personal loans is in-
creasingly on the rise with younger generation relying on them to a great extent. The principal
amount of investment for the Club must not ideally be too large as it would be causing a hin-
drance within the SEC, not too small, as it might not even allow the club to prosper without re-
turning a new offering.
References:
creasingly on the rise with younger generation relying on them to a great extent. The principal
amount of investment for the Club must not ideally be too large as it would be causing a hin-
drance within the SEC, not too small, as it might not even allow the club to prosper without re-
turning a new offering.
References:
Securitizations Securing the Future - LendingClub Blog. (2019). Retrieved 24 September 2019,
from https://blog.lendingclub.com/securitizations-securing-future/
LendingClub Closes First Self-Sponsored Securitization to Expand Investor Access. (2019). Re-
trieved 24 September 2019, from https://www.prnewswire.com/news-releases/lending-
club-closes-first-self-sponsored-securitization-to-expand-investor-access-
300478662.html
Tenebruso, J. (2019). Why LendingClub Stock Leapt 12.4% Today | The Motley Fool. Retrieved
24 September 2019, from https://www.fool.com/investing/2019/05/08/why-lendingclub-
stock-leapt-124-today.aspx
Yahoo is now part of Oath. (2019). Retrieved 24 September 2019, from https://finance.yahoo.-
com/quote/LC/financials/
from https://blog.lendingclub.com/securitizations-securing-future/
LendingClub Closes First Self-Sponsored Securitization to Expand Investor Access. (2019). Re-
trieved 24 September 2019, from https://www.prnewswire.com/news-releases/lending-
club-closes-first-self-sponsored-securitization-to-expand-investor-access-
300478662.html
Tenebruso, J. (2019). Why LendingClub Stock Leapt 12.4% Today | The Motley Fool. Retrieved
24 September 2019, from https://www.fool.com/investing/2019/05/08/why-lendingclub-
stock-leapt-124-today.aspx
Yahoo is now part of Oath. (2019). Retrieved 24 September 2019, from https://finance.yahoo.-
com/quote/LC/financials/
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