Email - "An Update on Note Availability in Your State" (Now unavailable in NY+)

[jrl]

According to their most recent quarterly report individual investors now represent only 5% of originations (lowest % ever):

Well, if they did better at selecting which notes to make fractional, they would have never lost so much retail interest.

Deciding that a 5% ROI that turns into 2.5% or less after tax and variance (even negative!) is good enough to attract reatil investors is certainly living in a fantasy world.

If I (and others judging by which notes get bought up first) can spend a few hours here and there backtesting to create good filters to minimize charge-offs and bring pre-tax returns over 10%, then LC certainly can too. They just choose not to, because some bean counter thinks that a 5% average "ANAR" (pre-tax, taxed as income) is attractive enough for retail investors, even after seeing retail drop off when returns dropped to a third of what they were before all the scandals.

https://www.lendingclub.com/info/demand-and-credit-profile.action

If I wasn't getting at least 5% after tax, I would'nt need to be prevented from investing to cash out my taxable, it would've already happened by now.

[Fred93]

individual investors now represent only 5% of originations

I wonder ... is this due to lack of retail investor interest? Or did the large investors simply gain interest and push out retail by being faster and cheaper and easier for LC to deal with?

Edward

LC learned they could grow faster in these other markets.  LC has always had a very strong growth imperative.  Therefore, they emphasized the markets in which they saw growth.  Speaking of the growth imperative ... you see it in every quarterly investor conference call where they explain that they're losing money, but isn't it great that they grew.  From an investor perspective, I think the huge growth story died a long time ago, and LC might be better off emphasizing profitable operation rather than growth.  I don't think they are going to agree with me, so I don't try to engage them in argument.

Also, I believe they structure fees in such a way that the institutions pay them more than the retail customers do, per $ of loan.  I know that sounds strange, but that's how my math comes out. 

This led them to deemphasize the retail market, which led to a self-fulfilling prophesy.  They don't work at generating interest among retail investors.  ...so its no surprise that their view is that there isn't great demand in the retail market.

Renaud Laplanche, LC's original CEO often said that the retail market was important because retail investors are "sticky", ie likely to remain in place thru credit cycles.  In a financial downturn, some institutional customers, hedge funds (for example) can literally dry up overnight.  I believe Renaud's thoughts on this subject are long forgotten in today's LC management.  Is that because the environment has fundamentally changed, or are they simply thinking short term?

On the other hand, they've moved past hedge funds, and now the majority of their business is with banks.  I think banks are surely a lot stickier than hedge funds.  The ecosystem around banks is complicated, and I'm not an expert on it.  I don't understand why banks are so interested in investing in LC loans. ...but they clearly are.  Many banks no longer view LC as a competitor and are essentially outsourcing lending operations to LC.  There are exceptions of course: Marcus, etc. 

They view themselves as playing in a different arena now.  We're not in their arena any more.

[bkcarolina]

individual investors now represent only 5% of originations

I wonder ... is this due to lack of retail investor interest? Or did the large investors simply gain interest and push out retail by being faster and cheaper and easier for LC to deal with?

Edward

They lost interest in us long, long ago, once we'd served their purpose. Now they're just saying GTFO a little more explicitly.

[Rob L]

Another quick look at the Q2 presentation reports 200k+ self directed individuals that invested $155m. That's $775 per investor in Q2; or $258 per investor per month; or a little over 10 notes of $25 each per investor per month.  The self directed investor business isn't exactly booming

[investny]

Anyone got/heard any updates on this situation. Or should we just all forget about LC?

[Edward Reid]

If LC opens it up again, I'll invest again. I'm not planning on it though. I'm withdrawing cash as it accumulates and spending my time thinking about other stuff. Lending Club? Sounds vaguely familiar. Was that a basketball team?

Edward

[Fred93]

Another quick look at the Q2 presentation reports 200k+ self directed individuals that invested $155m. That's $775 per investor in Q2; or $258 per investor per month; or a little over 10 notes of $25 each per investor per month.  The self directed investor business isn't exactly booming

I didn't find info that in the Q2 presentation.  I believe you, but I tired out before I found it.  I went to the 2018 10K, where I found total loan origination 10.881B for all of 2018, and self-directed is 6% in the most recent quarter.  (was a little more in earlier quarters.)   Then 6% of 10.881B = 653M annual self-directed. which roughly matches your quarterly number.

Looking at my monthly statements, I see how much I bought each month during 2018.  (Its about the same every month, as I'm just recycling, so after I looked at a few months I realized all I had to do was take one and multiply by 12 to get an annual number.)  I won't tell you what fraction of the total is me, but I can say there obviously aren't very many of us left!

[Jctraugott]

I’ve been with LC since early on, endured removal of lender ability to ask borrowers questions, powered through when auto investing became the only way to get the better notes before they were gone, watched as institutional investors were given access to the cream of the crop, maintained faith through the leadership scandals, struggled through recovery from the F and G note debacle (thanks to folioFn), complied with the onerous IRS rules, and all the while increased my stake in the platform over the years. 

I’ve reached a point of inflection with this latest event.  What’s different?  What’s different is that each of the previous struggles could be explained or justified; growing pains, market changes, underwriting lessons learned, pursuit of profitability, competition, and so forth.  There no no way however to justify  suspension of note creation is multiple states without an explanation to investors.  Trust is broken.  I thought that we (lenders) were part of the team but this event is a wake up call.  We are not on the team.  I’m not sure what we are to LC but I’m feeling used and taken advantage of. 

Perhaps as others have said, individual lenders no longer matter to them, or perhaps what happened is so embarrassing that they don’t want anyone especially their coveted institutional investors to know, or perhaps they assume we will take what they dish out and stick with them.  It’s all speculation.  We don’t really need to know though because Trust is broken.  It calls into question everything they say and do.  Notes have always been risky but it seemed acceptable risk with a good underwriter behind it.  Now, the level of risk is increased beyond acceptable limits in the absence of transparency and trust.

I’m not yet sure what I personally will do with this segment of my portfolio, but the relationship with LC is broken. 

[kib]

@jctraugott, I absolutely agree with this.  I haven't been in from the beginning, but I've seen many of the things you mention and yes, this one is the straw that's breaking the camel's back.  I've gone from feeling like part of the team, to feeling ignored but functional, to this "talk to the hand" business.  The risk of non-liquidity was always clear, but there was no stated risk that I suddenly wouldn't be able to reasonably manage my money OR get it back.  This is like they locked the door to participation with all my money on the other side and they won't even acknowledge it.  "You want out?  Sure, just go to this secondary site and put your notes up at a 20% loss and we'll take the profit from that, thanks for the donation." 

[jrr6415sun]

This happened to me in Florida years ago (I don't remember the exact year). LC turned off FL and told me they just had to get their license renewed every few years and that they were waiting on the government to sign off on it. A few months later FL was back. I have to assume this is a similar situation.

[jrr6415sun]

I’ve been with LC since early on, endured removal of lender ability to ask borrowers questions, powered through when auto investing became the only way to get the better notes before they were gone, watched as institutional investors were given access to the cream of the crop, maintained faith through the leadership scandals, struggled through recovery from the F and G note debacle (thanks to folioFn), complied with the onerous IRS rules, and all the while increased my stake in the platform over the years. 

I’ve reached a point of inflection with this latest event.  What’s different?  What’s different is that each of the previous struggles could be explained or justified; growing pains, market changes, underwriting lessons learned, pursuit of profitability, competition, and so forth.  There no no way however to justify  suspension of note creation is multiple states without an explanation to investors.  Trust is broken.  I thought that we (lenders) were part of the team but this event is a wake up call.  We are not on the team.  I’m not sure what we are to LC but I’m feeling used and taken advantage of. 

Perhaps as others have said, individual lenders no longer matter to them, or perhaps what happened is so embarrassing that they don’t want anyone especially their coveted institutional investors to know, or perhaps they assume we will take what they dish out and stick with them.  It’s all speculation.  We don’t really need to know though because Trust is broken.  It calls into question everything they say and do.  Notes have always been risky but it seemed acceptable risk with a good underwriter behind it.  Now, the level of risk is increased beyond acceptable limits in the absence of transparency and trust.

I’m not yet sure what I personally will do with this segment of my portfolio, but the relationship with LC is broken.

If you stuck with them through all of that this is very small in comparison. Wait until this is over and then decide if their silence was good or not. Maybe they don't want to announce that they were breaking the law? If that's the case doesn't seem smart to bring that to people's attention.

[jrr6415sun]

This happened to me in Florida years ago (I don't remember the exact year). LC turned off FL and told me they just had to get their license renewed every few years and that they were waiting on the government to sign off on it. A few months later FL was back. I have to assume this is a similar situation.

I called lending club today to ask about FL and they told me it was that they had to get their license renewed by the state, which is what I suspected had happened and happened before. They told me they mentioned this on their Q3 call and that they sent everyone an email last week, although I didn't get that.

[investny]

I'm in NY and did not get any emails from LC.

[investny]

Almost  4 months and still no updates from LC!

[Edward Reid]

Personally I'm not expecting any updates. As others have pointed out, LC has little incentive to work on keeping individual investors. If my state gets brought back into the fold, I'll reinvest, but until/unless that happens, I'l just take my payments and run.

Edward