Do I have this right?

[Dennis]

This is quite probably the reason.  I haven't seen a complaint from a retail investor around here for what, 23 minutes? 

LOL. Of course you're right about that, maybe I was too busy complaining not to think of that.  I wonder if anyone from LC still reads these posts?  They used to, and sometimes even responded.  I'm guessing that's not allowed anymore now that LC is in the teenager stage of becoming a viable corporation - no more playing around.  When the IPO is launched, that will be like turning 21 and becoming a fully responsible adult.  Our little LC will finally be all grown up.

[core]

When the IPO is launched, that will be like turning 21 and becoming a fully responsible adult.  Our little LC will finally be all grown up.

Yeah well we all know what happens when teenage daughters grow up too fast.

[Fred]

When the IPO is launched ...

LC will enter into the "public company domain", with the many regulators that it needs to answer to.  The Sarbanes–Oxley alone will cause enough headaches, let alone the analysts' opinions that can cause major swings in the stock price.

The IPO price has to be right, both for the management and equity investors, to make this worthwhile.

[brycemason]

Interested in your valuation, Fred. In fact, it might be fun to have a LendAcademy Forum LC IPO Valuation / Offering Price Thread.

[Dennis]

So it's Saturday morning and it's the 9 AM (EST) feeding at LC.  I've been watching a note that I was quick enough to grab, to monitor its progress to full funding.  It's an E4, fits my criteria nearly perfect, and it being early Saturday morning on a holiday weekend, I feel lucky to have gotten this note before the whales devoured it.  I was very quick to nab it, literally seconds after it hit the platform, and sure enough, it had completely disappeared from the platform the second I rechecked for it, after I had made my purchase though.  I then went to my cache of purchased notes and of course saw that it hadn't been fully funded yet even though it's no longer listed on the platform.  When I clicked on that note to see what progress it was making, I noticed that only 9 others besides me were lucky enough to get their hooks into it.  Now this is a $14,600 note, so that seemed like very few investors for that size.  Sure enough, it was only 4.28% funded, yet no longer available on the platform.  I kept checking back on it to see its progress, 2 more had joined the ranks of ownership, now up to 5.14%, about 5 minutes after it disappeared from the public platform.  So as I was jumping around to watch this note, it did resurface again on the platform - ah ha...  it lasted about 1 minute there and I watched as a few more people jumped in, now up to 16.44% by 27 people.  And then poof, the note was gone again.  I checked my cache for that note again, 44 ppl on board, but now 52% funded.  It then sat in my account for another 20 - 25 minutes, stuck at around that 52% mark until it finally fully funded with a total of 48 ppl.  So exactly $7,000 (nearly half) of it sat unfunded from the very beginning until the end.  I doubt there was a small investor grabbing that note, locking $7,000 of it out from the platform, and then finally funding it.  To me it looks like there were 2 whales in this note and 46 small fish. 

I've seen this same thing going on with $35,000 notes also, so its whales (institutions) in my opinion that are locking these notes out from the small investors.  Only lucky (or maybe skilled) handfuls of small fish manage to get a bite of them.  I have other notes in my cache waiting for issuance, large denomination notes, where only 20 ppl or so got their teeth into it.  You have to be really fast these days when competing with these intuitions, especially when they seem to be playing dirty.  So it seems the whales have not only been invading the pond, but they are dominating it and pooping in it.  We need a new pond.   

[rlv99]

So it seems the whales have not only been invading the pond, but they are dominating it and pooping in it.  We need a new pond.   

I'm for shooting the whales as we leave!! 

[Fred]

I checked my cache for that note again, 44 ppl on board, but now 52% funded.  It then sat in my account for another 20 - 25 minutes, stuck at around that 52% mark until it finally fully funded with a total of 48 ppl.

Thanks for sharing!  Quite fascinating series of events.

It also seems that the 4 last investors took their time (25 minutes) before deciding to go ahead with their purchase.  Either their computer is very slow (unlikely); or there is a human making calculations and judgment calls.

[Fred]

Interested in your valuation, Fred. In fact, it might be fun to have a LendAcademy Forum LC IPO Valuation / Offering Price Thread.

Ha .. ha ..,  I am thrilled to hear this request from you, Bryce.

Just to let everyone know that:

1. Anecdotally speaking, IPO is half art and half science.  It's almost similar to setting a price for a piece of painting.

2. People who does IPO got paid a good deal amount of money (about 5-7% of issued amount) -- http://www.pwc.com/en_us/us/transaction-services/publications/assets/pwc-cost-of-ipo.pdf.  If LC could raise $ 1B through IPO, that would be $ 50M for the syndicate.

3. Personally, LC IPO won't be as big as Facebook IPO (duh?); might not even be as big as LinkedIn's.  This should give you get an idea about my expectation.

4. See if you can recognize some of the recent IPOs:  http://www.nasdaq.com/markets/ipos/activity.aspx?tab=pricings.  What's important in that list is not the Price, but the Offer Amount, and more importantly how much of the company is represented by the Offer Amount.

[rawraw]

Interested in your valuation, Fred. In fact, it might be fun to have a LendAcademy Forum LC IPO Valuation / Offering Price Thread.

Ha .. ha ..,  I am thrilled to hear this request from you, Bryce.

Just to let everyone know that:

1. Anecdotally speaking, IPO is half art and half science.  It's almost similar to setting a price for a piece of painting.

2. People who does IPO got paid a good deal amount of money (about 5-7% of issued amount) -- http://www.pwc.com/en_us/us/transaction-services/publications/assets/pwc-cost-of-ipo.pdf.  If LC could raise $ 1B through IPO, that would be $ 50M for the syndicate.

3. Personally, LC IPO won't be as big as Facebook IPO (duh?); might not even be as big as LinkedIn's.  This should give you get an idea about my expectation.

4. See if you can recognize some of the recent IPOs:  http://www.nasdaq.com/markets/ipos/activity.aspx?tab=pricings.  What's important in that list is not the Price, but the Offer Amount, and more importantly how much of the company is represented by the Offer Amount.

I'd bet the share price is between 10 and 40! Now the size of the issuance....

Sent from my SAMSUNG-SGH-I747 using Tapatalk 2

[Rob L]

So it's Saturday morning and it's the 9 AM (EST) feeding at LC...

Guess you gotta spell it out for me. I do not doubt the accuracy of your post in the least, but why would a whale (or pod of them) behave in this manner?

[Dennis]

So it's Saturday morning and it's the 9 AM (EST) feeding at LC...

Guess you gotta spell it out for me. I do not doubt the accuracy of your post in the least, but why would a whale (or pod of them) behave in this manner?

It's called G.R.E.E.D.  How's it any different for institutions fighting for these limited notes than it is for us.  They have to compete for them in the same way we do, the difference being they seem to have unlimited amounts of cash and maybe superior software that allows them to quickly lock these notes out from everyone else, at least until they take what they want of them.  I'm sure institutions have just as many different investment styles as we do.  But it would take at least 2 large institutions (or 1 with 2 accounts) to temporarily lock a note out from the platform.  I've been watching this for weeks now, and I really don't see how small investors are instantly locking out large denominated loans, and then returning them from their cache in tandem back to the platform again, where maybe 4% of that note gets funded in those first few minutes.  And we all know by now that you can lock your position in a note without committing to it just by adding it to your pre purchase cache.  If you have enough money (institutions) you can lock out a lot of notes in an instant after they hit the platform, blocking others from getting to them, and then comfortably pick and choose amongst them.  Now of course this is all theory, I can't prove any of it and in fact I could be dead wrong about all this.  But the evidence seems to be overwhelming.  And I didn't come up with this on my own, it's been talked about in other places on this board.  I just summarized what others have already posted on this topic.  If I'm wrong though, I'm wrong.......

[cfb]

This is actually simplifying note buying.  Hit refresh from the drop time until you see the load of notes hit.  Hit the filter, select all, add to order.  Then look at the cart for 3 minutes and whatever doesn't go to 99%+ by then, remove because there's something wrong with it.  Everything else that hits 99%/closing is usually a decent looking note.

Speed to the point of purchase is still a little bit of a problem, but all these nice autobuyers with heavy institutional money developing sophisticated filters really helps with the decision making.

[Dennis]

Everything else that hits 99%/closing is usually a decent looking note.

I'm going to have to disagree on that.  That might of been true a year or two ago, but no longer.  Hell, I don't think that was true even then.  Everything gets funded now, including all the good, the bad, and the ugly (I think I hear a movie theme song somewhere).  I see some pretty retched notes get quickly funded these days, notes no one in their right mind would of touched a year ago, and I can't fathom why they get filled.  They're just awful looking and it doesn't take rocket science to figure out which ones they are.  But some defaults will happen regardless of how careful you are in note selection, and the more higher risk notes you invest in, the more defaults you're going to get.  That's just the way it is.  But that shouldn't be a problem though unless you're improperly managing risk.  Stick with as many $25 notes as you can bear (diversification), develope a consistent note selection criteria that works (time and experience will teach on that), and be realistic with your expectations.  I'm approaching 50k in notes now and I still only buy $25 notes.  I had my first default at the very end of my first year, and they haven't stopped coming since then.  But I'm still at a combined 15%+ return between 3 P2P accounts after 2 years, and I think that is mostly due to my exhaustive diversification efforts, hand picking ALL my notes (no tools), sticking as closely as possible to a preselected note criteria, and of course a bit of old fashioned luck.  So a little advice - don't assume because a note gets 99% funded it's a good one.  That's actually a very lazy way to select notes and I don't know too many lazy people who do well as investors.  And some will say that there is no such thing as a good note or a bad one - I'd like to see their returns in a year or two......   

[cfb]

Sorry, but that hasn't been my experience lately.  Most of the notes that fill or mostly fill within a minute or two look pretty good.  Most of the ones that are still <65-70% after a minute or so have at least one wart on them.  I still look at them, but I'm good with the vast majority of ones that go from release to closing in 90 seconds, and the ones that don't I usually don't care for either.

They're D-G notes, over 680 fico, no huge revolving debt (<35k), only credit card/debt consol/home improvement, working for 2+ years, no 'other' home ownership, no major derogs, no public records, make over 5k a month, payment close to 10% of the gross monthly income, 0 or 1 inquiry, credit line > 5 years, dti < 25 (preferably 20), no more than 2 delinquencies, and no 'spouse loans'.

Everything doesn't sell off right away either.  I see ~40-75 notes that are all A or B with some issues or lower grades with lots of issues that are hanging around for a while.  Interestingly, one note that was titled "Dallas Cowboys Rock!!!" filled halfway, then sat there for 2 days as non Cowboy fans were (I guess) turned off by the title, then the title changed and it did fill within the day.  Wasn't a bad loan, but wasn't a great one either.  I doubt the autobuys read and interpret the loan title, so it seems people are still well involved.

In fact (and I think I said this before), an analysis of what DOESN'T sell within 15 minutes is a good example of what not to buy.  Low interest notes, lots of inquiries, high debt, lots of defaults, low fico's, no job length/employer, 10+ years of credit history with a low revolving balance and few lines of credit (spouse loan because the other spouse has crap credit), very low income, and small business loans.

[Fred]

so it seems people are still well involved.

+1

This seems to apply to institutional investors as well.  The fact that institutionals held their notes in the cart for 25 minutes before committing the orders seemed to indicate that humans were still involved.

In fact (and I think I said this before), an analysis of what DOESN'T sell within 15 minutes is a good example of what not to buy.  Low interest notes, lots of inquiries, high debt, lots of defaults, low fico's, no job length/employer, 10+ years of credit history with a low revolving balance and few lines of credit (spouse loan because the other spouse has crap credit), very low income, and small business loans.

This sounds like a good project to do.  If you have done an in-depth analysis, I'd love to see what quantitative results you found.