Author Topic: A record day at @Prosper yesterday - over $3.2 million in new loans originated  (Read 6645 times)


Xenon481

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Please note that whether or not this is a good thing for Prosper's bottom line is currently unknown.

All of Prosper's financial filings with the SEC have shown that they have classically been unable to properly scale their revenues with their expenses.  In nearly every single filing, even as Prosper's originations revenues increased, their expenses increased dramatically more.

Note that Prosper's quarterly losses have continued to get high and higher by significant percentages even though they keep increasing their originations revenues.

Past performance is not necessarily indicative of future results, but it does indicate that it is not a truism that increasing revenue increases profit.

It is possible that the new management has been able to make changes to Prosper which turns that expense scaling trend around, but there hasn't been any evidence to that case in the 2013 Q1 and Q2 filings. Maybe Q3 will be different or maybe it won't. We will just have to wait and see.
The Motley Fool says to Avoid Prosper Like The Plague.

Read about historical Prosper actions/problems at Prospers.org

hippo387

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However, Xenon, it does indicate that a bankruptcy (which you have long warned of) is growing less likely by the day.

Xenon481

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However, Xenon, it does indicate that a bankruptcy (which you have long warned of) is growing less likely by the day.

No, it doesn't if expenses continue to grow at a rate faster than revenues.

Prosper had their highest post SEC revenues in 2013 Q2, but that is also their quarter with by far the highest expenses. Even with record revenues, Prosper posted a 2013 Q2 loss (exempting the settlement) that was 30% higher than their previous record quarterly loss.

They have continued to burn through their VC cash faster and faster because they have thus far not been able properly scale their business.
The Motley Fool says to Avoid Prosper Like The Plague.

Read about historical Prosper actions/problems at Prospers.org

nonattender

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My spies tell me that Prosper just got a fresh capital injection... we'll see. ;)
A little nonsense now and then is relished by the wisest men.

DanB

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However, Xenon, it does indicate that a bankruptcy (which you have long warned of) is growing less likely by the day.

Not necessarily. Xenon's interpretation is correct in this case. So far the increase in expenses have substantially outpaced the increase in revenues & obviously this not something that can continue indefinitely.

However, deep pockets can allow a business a very long time to turn things around if it so wishes & I don't think anyone doubts that Prospers current backers have very very deep pockets. So it is entirely possible that they're working a plan that has a longer time frame in mind & may be relatively unconcerned with increasing losses this quarter or next.

 

Fred

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My spies tell me that Prosper just got a fresh capital injection... we'll see. ;)

It's now safe to share:

Prosper Raises $25 Million in New Round, Adding BlackRock as a Backer
http://dealbook.nytimes.com/2013/09/24/prosper-raises-25-million-in-new-round-adding-blackrock-as-a-backer/

DanB

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Case in point. Talk about "deep pockets". No ones pockets are deeper than Blackrock...............& now that they've decided to invest 0.00001% of their assets in Prosper, everything will be fine. In 9 months when Prosper is still deep in the red they'll just open their wallets & kick in another 0.00001%. At that rate Prosper will outlive our great grandchildren.  :)

hippo387

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Exactly my point about bankruptcy being less likely -- higher growth means the business is more attractive to investors / suitors. Sorry I didn't spell it out in crayon for Xenon, the point has been made countless times.

Xenon481

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Exactly my point about bankruptcy being less likely -- higher growth means the business is more attractive to investors / suitors. Sorry I didn't spell it out in crayon for Xenon, the point has been made countless times.

I have only posted here estimated timings of when additional VC infusions would be required in order for Prosper to avoid Bankruptcy. I have never said anything like "Prosper is going to go bankrupt soon!"

From the thread about Prosper's 2013 Q2 SEC financial filings:
http://www.lendacademy.com/forum/index.php?topic=1447.0
Quote
At Prosper's current cash level and burn rate (and taking into account the first payment they will need to make for the Settlement), Prosper only has 1-2 more quarters until they will require yet another venture capital cash infusion lest they declare bankruptcy.

Looks like my estimation of timing for the VC infusion was accurate.
The Motley Fool says to Avoid Prosper Like The Plague.

Read about historical Prosper actions/problems at Prospers.org

thezfunk

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My questions is, what happens to the other investors?  I don't know anything about getting seed or startup money let alone having to go back and ask for more, since I have never been involved in a startup.  Don't you have to give them something for their money?  At least a promise?  Doesn't that water down whatever you gave the other guys who handed you some money previously?  Do they all have to be involved in the decision to let someone else up to the table?  Obviously, if someone came up to me and said I had to water down my ownership or lose everything, I'd be pretty open to sharing with someone else.

SeattleSun

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"Beyond its participation as an equity investor, BlackRock is likely to lend money to borrowers as well."


Peter

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My questions is, what happens to the other investors?  I don't know anything about getting seed or startup money let alone having to go back and ask for more, since I have never been involved in a startup.  Don't you have to give them something for their money?  At least a promise?  Doesn't that water down whatever you gave the other guys who handed you some money previously?  Do they all have to be involved in the decision to let someone else up to the table?  Obviously, if someone came up to me and said I had to water down my ownership or lose everything, I'd be pretty open to sharing with someone else.
All the early investors in Prosper have been diluted dramatically. But what is interesting in this latest round is that Sequoia lead the round so they obviously believed in Prosper so much that they wanted to maintain a strong position even at a much higher valuation than just a few months ago.
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thezfunk

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My questions is, what happens to the other investors?  I don't know anything about getting seed or startup money let alone having to go back and ask for more, since I have never been involved in a startup.  Don't you have to give them something for their money?  At least a promise?  Doesn't that water down whatever you gave the other guys who handed you some money previously?  Do they all have to be involved in the decision to let someone else up to the table?  Obviously, if someone came up to me and said I had to water down my ownership or lose everything, I'd be pretty open to sharing with someone else.
All the early investors in Prosper have been diluted dramatically. But what is interesting in this latest round is that Sequoia lead the round so they obviously believed in Prosper so much that they wanted to maintain a strong position even at a much higher valuation than just a few months ago.

I see.  But how is that valuation determined and agreed upon?  So the valuation went up so to maintain the same percentage of ownership, shall we say, Sequoia had to kick in more money?

Peter

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I see.  But how is that valuation determined and agreed upon?  So the valuation went up so to maintain the same percentage of ownership, shall we say, Sequoia had to kick in more money?

There is no real formula for agreeing on a valuation, it is somewhat of a bidding process. Someone wants in and they decide what they are willing to pay. Sequoia certainly didn't have to kick in money, they could have passed. But they obviously wanted to maintain their position.
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