Author Topic: LC declining stock price: a signal?  (Read 10619 times)

sergio0p

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LC declining stock price: a signal?
« on: January 04, 2016, 06:01:55 PM »
Besides the recent FED increases in the interest rates and LC adjustment, is there any known reason why the stock price of LC has gone down a lot in the last month? Is the market thinking that the quality of the loans is going to worsen so we will have more non-performing loans? Any theories?

nonattender

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Re: LC declining stock price: a signal?
« Reply #1 on: January 05, 2016, 04:18:15 AM »
My theory is that the market doesn't understand the scale and momentum of the business, but I always think everyone else is irrational. ;)

The thing's worth $4/share in cash alone, so, I've been very comfortable buying at these levels - but I think that I understand the business.

We'll see...
A little nonsense now and then is relished by the wisest men.

thezfunk

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Re: LC declining stock price: a signal?
« Reply #2 on: January 05, 2016, 05:34:18 PM »
My theory is that the market doesn't understand the scale and momentum of the business, but I always think everyone else is irrational. ;)

The thing's worth $4/share in cash alone, so, I've been very comfortable buying at these levels - but I think that I understand the business.

We'll see...

I am so tempted at $10 a share but I am closing on my first house this week so it is all cash on deck for that.

icanhasloanz

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Re: LC declining stock price: a signal?
« Reply #3 on: January 06, 2016, 01:46:53 AM »
I'm waiting for it to level off first before I buy some, but I don't see any reason for the drops

avid investor

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Re: LC declining stock price: a signal?
« Reply #4 on: January 06, 2016, 09:06:26 AM »
Besides the recent FED increases in the interest rates and LC adjustment, is there any known reason why the stock price of LC has gone down a lot in the last month? Is the market thinking that the quality of the loans is going to worsen so we will have more non-performing loans? Any theories?
Have you noticed the market in general?  Unless you're looking at gun stocks, you're pretty much down.

wiseclerk_com

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Re: LC declining stock price: a signal?
« Reply #5 on: January 06, 2016, 02:45:21 PM »
My theory is that the market doesn't understand the scale and momentum of the business, but I always think everyone else is irrational. ;)

The thing's worth $4/share in cash alone, so, I've been very comfortable buying at these levels - but I think that I understand the business.

We'll see...

In general I like your viewpoint.

However Nasdaq data says there have been 23 sales by insiders vs only 1 buy during the past 3 months. Shouldn't the institutional investors understand the business, too? And surely if they do they don't need to cash out to invest into better alternatives?
I publish the http://www.p2p-banking.com blog

Fred93

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Re: LC declining stock price: a signal?
« Reply #6 on: January 06, 2016, 03:31:59 PM »
Nasdaq data says there have been 23 sales by insiders vs only 1 buy during the past 3 months. Shouldn't the institutional investors understand the business, too?

I think the numbers are what you'd expect for a newly public company at this stage.  There are many reasons people sell.  Some of these folks have had their money tied up for many years, and are now able to get some cash out.  They're not all institutions.  Some of these are options exercises, for example.


Quote
And surely if they do they don't need to cash out to invest into better alternatives?

VCs generally do feel a need to take their money out.  That's so they can invest in the next early stage company.  Just because they have considerable money doesn't mean they invest in all stages of a company's life.

I believe the main reason LC's stock has been going down is that the IPO occurred at a ridiculously high valuation.  Real simple.

Now the question is "where's the right valuation?"  Things tend to overshoot, so it seems likely LC will overshoot on this downward movement.  I don't know the answer.  I do believe that everything I know about LC indicates they are the winner. The future is very uncertain because the marketplace and environment for this kind of business are changing so rapidly.  Competition, regulation, new forms of investment (the consumer loan mutual funds are coming), etc.  These things are not only uncertainties for LC, people also grab onto pieces of them and draw wrong conclusions.  In other words, these issues in the business environment are also noise for the investor to sift thru.  An example would be one of the many stories that go something like "The big banks are coming, so the game is over."  Same guys probably wrote stories about how the digital camera manufacturers were doomed because "Kodak is entering the market!"

I don't believe that anyone has a stock valuation model which is suitable for a company growing sales as fast as LC.  When you double every year, most stock valuation models become absurdly sensitive to various parameters, and effectively useless.

nonattender

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Re: LC declining stock price: a signal?
« Reply #7 on: January 07, 2016, 04:04:44 AM »
My theory is that the market doesn't understand the scale and momentum of the business, but I always think everyone else is irrational. ;)

The thing's worth $4/share in cash alone, so, I've been very comfortable buying at these levels - but I think that I understand the business.

We'll see...

In general I like your viewpoint.

However Nasdaq data says there have been 23 sales by insiders vs only 1 buy during the past 3 months. Shouldn't the institutional investors understand the business, too? And surely if they do they don't need to cash out to invest into better alternatives?

Their business model is to go back to growing their portfolio of tiny little seedlings, not switch to sitting around watching one giant oak grow up!

https://en.wikipedia.org/wiki/J_curve#Private_equity (last graph captures cash-return stage well)
A little nonsense now and then is relished by the wisest men.

Boatguy

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Re: LC declining stock price: a signal?
« Reply #8 on: January 07, 2016, 07:48:22 PM »
VCs generally do feel a need to take their money out.  That's so they can invest in the next early stage company.  Just because they have considerable money doesn't mean they invest in all stages of a company's life.
This is categorically wrong.  Hedge funds work that way, not VC's.

VC's rarely sell stock, they distribute it to their limited partners "in kind" at what they hope will be the peak of the value so as to maximize their carried interest.  The decision to sell is made by the limited partners who are usually managing a large diversified portfolio and will consider it part of their public stock portfolio to be bought and sold per the strategy of whomever is managing their public stock portfolio.

Yes, the individual MDs or GPs of the VC firm will also receive a distribution, but it is small compared to the LPs, typically 20% of the entire position.

LC is a broker, not a lender.  They make money on the loan origination and servicing the loans.  If the loan defaults, they will have less to service, but they don't suffer any capital loss on the default so loan defaults are only an issue to the extent that they reduce the volume of serviceable loans and reduce lender returns which may in turn reduce lender demand and reduce LC's growth.

The more likely reason for the stock price fall is that they are not making money and Renaud has not been able to emulate Bezos and convince the analysts that he's growing the top line and investing the profits in the future.  He needs to convince them he's a high growth company, which he has failed to do.

Fortunately, we make money even if LC does not.

lascott

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Re: LC declining stock price: a signal?
« Reply #9 on: January 07, 2016, 11:49:01 PM »
In case you missed this:

Podcast 54: Renaud Laplanche of Lending Club
The Lending Club CEO shares his thoughts on the last 12 months and what we can expect from Lending Club in 2016 and beyond.

http://www.lendacademy.com/podcast-54-renaud-laplanche-of-lending-club/

In this podcast you will learn:

His perspective on the past year and what has surprised him most.
* What Renaud has been working on specifically in the last 12 months.
* Lending Clubís approach to the large amount of cash on their balance sheet.
* How Lending Club is able to achieve decreasing customer acquisition costs.
* How the transition is going with their new Chief Risk Officer.
* Renaudís view on the San Bernardino shooters and the Prosper loan.
* Their LCOI product and what it means for their focus on retail investors.
* The status of their small business lending operation and their plans to make these loans available to all investors.
* The kind of regulatory oversight that Lending Club sees today.
* Renaudís thoughts on any potential new regulatory oversight.
* The new CFPB program for oversight on large consumer lenders.
* Where Lending Club stands on self-regulation today.
* His thoughts on his 4th annual keynote presentation at LendIt USA 2016.
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mo

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Re: LC declining stock price: a signal?
« Reply #10 on: January 18, 2016, 12:33:53 PM »
Besides the recent FED increases in the interest rates and LC adjustment, is there any known reason why the stock price of LC has gone down a lot in the last month? Is the market thinking that the quality of the loans is going to worsen so we will have more non-performing loans? Any theories?

There has been a mostly flat to general down trend in the market over the past year and esp. since the Fed raised rates.  The rise in rates is a negative in general for stocks but probably a positive to LC investors because it manes LC will get to raise rates on their loan products and thus be a more attractive investment.

The other thing at play is the insider 180 lock-up period expired in June 2015 so that is naturally going to put downward pressure on the price since people who have waited 9 years to see a return on their options are going to naturally want to take some money off the table.

nonattender

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Re: LC declining stock price: a signal?
« Reply #11 on: January 19, 2016, 01:35:00 PM »
The best complaint that I've heard so far is:  "LC only cares about its lenders not its stockholders!"

I considered it to be a compliment dressed up as a complaint... ;)
A little nonsense now and then is relished by the wisest men.

Riker

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Re: LC declining stock price: a signal?
« Reply #12 on: January 20, 2016, 12:41:45 AM »
Recently opened an LC account and have been researching note investing and LC in general to get a better idea of risk.  The stock has tanked so much since its IPO that I am thinking about buying into it, so I have been trying to get an idea on where it might turn around.  I have read through a handful of threads to get a better idea but still wondering.  Any helpful thoughts would be great.

It was mentioned that LC has 4$/share cash, its actually 1.95, they have 738m cash and 378m shares.  There has been a lot of insider sales but most of it is options, I also kind of agree that its likely people cashing out now that they finally have the option to, before they couldn't because of the IPO.

There was a sharp drop midday today that looked odd with no news, not sure why.

Rating on NASDAQ are a strong buy, higher than most.  This along with the steady decline probably baffles me the most. :o  Price target 12 months out is 22.50 (16 to 25).

Financial statements looked good to me, steady increase in shareholder equity not counting the IPO jump.  Income does jump around a little but analyst feel it will increase.  I like the 1.95/share cash on hand, it gives them time to bring things around and gives real value to the stock. :)  Not sure how to predict future earnings per share and the right PE. ???

There was some debate on whether to consider LC a tech stock or financial.  I feel LC is a broker and should be considered a financial.  People can get credit cards on line and banks like Chase are considered financial.

I do think the IPO price was overvalued, I also understand the stock market right now is dropping with the very real possibility of major decline before it turns around.

With these thoughts maybe the thing to do is wait till the stock levels out for a period of time, just not sure it will level out or bounce right back up to some other level.  Any helpful input would be appreciated.
"Don't believe everything you read on the internet" - George Washington

mo

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Re: LC declining stock price: a signal?
« Reply #13 on: January 20, 2016, 03:12:27 AM »
I do think the IPO price was overvalued, I also understand the stock market right now is dropping with the very real possibility of major decline before it turns around.

With these thoughts maybe the thing to do is wait till the stock levels out for a period of time, just not sure it will level out or bounce right back up to some other level.  Any helpful input would be appreciated.

LC's expertise is most definitely financial, though they may be run business wise with a tech mentality.  Their strength is not their technical team.  At various points their website has been slow and clunky.  They have made strides to improve that in the past ~2 years.  Their website used to be pretty bad.

I would look at Facebook's IPO for an idea of what is going on in LC's stock and the tech IPO scene in general.  The way venture funded companies work these days they stay private longer than in the 90's and tend to be over valued at IPO and take a hit before getting enough growth to get the stock price back on track long term.  FB IPOed at 38 and went as low as 18 before turning around.  It took a little more than a year to recover though.

The drop midday today was attributed in news to more insider sale.  LC just started to turn a profit on a quarterly basis in the last reported quarter and their next earnings announcement is Feb. 22nd assuming the trend of increasing profit continues I would expect the stock price to begin a turn around.

Fred93

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Re: LC declining stock price: a signal?
« Reply #14 on: January 20, 2016, 04:10:48 AM »
LC just started to turn a profit on a quarterly basis in the last reported quarter and their next earnings announcement is Feb. 22nd assuming the trend of increasing profit continues I would expect the stock price to begin a turn around.

I believe that LC is managed to produce zero earnings at this time.  The nonzero amounts are "residuals", which can be positive or negative.  The positive earnings, in this view, is not a signal of anything.