Author Topic: LC workforce reduction  (Read 501 times)

Fred93

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LC workforce reduction
« on: April 23, 2020, 01:00:30 PM »
On April 20, 2020, LC filed an 8K with SEC containing the following text...

Quote
COVID-19 is having an unprecedented effect on consumers, small businesses and the broader economy, including the credit markets, and has resulted in a current reduction in platform investor demand for personal loans. In response, the Company has undertaken a number of initiatives to support its borrowers, protect investor returns, and preserve capital and liquidity. These initiatives better position the Company to navigate and serve members through today’s economic environment and over the longer-term as the need for the Company’s services grows.

On April 20, 2020, the Company’s Board of Directors (the “Board”) approved a restructuring plan (the “Plan”) to further address the impact of COVID-19 on the Company’s business by repositioning the Company’s expense base to better reflect current loan volume and better position the Company for profitability to achieve its strategic goals when the economy and business stabilizes. The Plan includes workforce reductions affecting approximately 460 employees.

In connection with the workforce reductions under the Plan, the Company expects to incur total pre-tax restructuring and related charges of approximately $10 million during the remainder of the year ending December 31, 2020, of which approximately $1 million represents an employee relief plan to assist impacted employees through this challenging time and the remainder represents future cash expenditures for the payment of severance and related benefits costs.

LC has spent years moving away from the retail investors to banks, who are now not buying.  Well.  Can't say we didn't warn 'em.

30% layoff is a pretty big step.  The demand problem must be severe.

Remember... this is a company that has essentially never been profitable, but has been "investing" for 10 years in building volume.

Fred93

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Re: LC workforce reduction
« Reply #1 on: April 23, 2020, 09:45:18 PM »
The CNBC story got it wrong.

CNBC says
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LendingClub CEO Scott Sanborn said the virus outbreak was having an “unprecedented effect” on consumers and small businesses, resulting in a drop in demand for personal loans

I read that as saying that consumers and small businesses have not been wanting to take out as many loans.  Whether that should be called "supply" or "demand" depends on which side of the business you're looking from.  But the CNBC article clearly comes across as meaning people don't want to borrow as much money.

I'm thinkin' that CNBC mixed up something Sanborn said about consumers with something he said about "demand".

LC 8K talks about "investor demand", which is the other side of the business.  That's investors who want to buy the loans, and are thus providing capital.

Even the words "investor demand" are misleading, because individual investors have not been significant to LC for many years.  Almost all of the money to buy LC loans comes from banks these day, followed by hedge funds.

The forbes article was clear.  It quoted LC's head of communications Anuj Nayar...
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While the coronavirus has caused 22 million job losses in the U.S., consumers are already struggling to pay back online loans. So investors have become skittish about funding LendingClub’s loans—investors are in a “wait and see” period, Nayar says. With revenue expectations dropping quickly, the company needs to cut fixed costs like employee salaries to meet annual expenses.

Perhaps a clear and straightforward statement would have been "Banks and other institutional investors have stopped putting money into consumer loans."

rawraw

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Re: LC workforce reduction
« Reply #2 on: May 09, 2020, 11:23:14 AM »
One thing banks do in crisis is shrink assets. This keeps capital ratios strong. So I am not surprised they don't want to grow a bunch in consumer loans, but the drop is quite amazing