Author Topic: FYI: 4 Reasons To Avoid LendingClub Stock  (Read 9410 times)

avid investor

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Re: FYI: 4 Reasons To Avoid LendingClub Stock
« Reply #15 on: December 16, 2014, 09:31:18 AM »
"Is each dollar of LendingClub revenue really worth $43? If you annualize its $144 million in reported revenue, you get $192 million — and if you divide that by LendingClub’s $8.3 billion market capitalization you get 43."  Huh?  He must have gone to a different school than the one where I got my Math degree.

Where did you get your Math degree? ;-)

Anyway, 43 was Price-per-Revenue.  Let's see if someone wants to open the Pandora's box of P/E discussion here.
Divisor and dividend were reversed, Fred.  Not only can do the math, but I know the terms.  ;)

avid investor

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Re: FYI: 4 Reasons To Avoid LendingClub Stock
« Reply #16 on: December 16, 2014, 09:38:22 AM »
Majority of loans on LC platform are credit card refinancing/debt consolidation, do you know why? Why do you think there are fewer borrowers with F. G loans and more borrowers with A. B loans? It is the interest rate spread between what borrower has to pay on credit card and on other sources vs on LC platform. By law, there is upper limit on credit card interest rate so when LC rates rise, the spread narrows and less incentive for borrowers to refinance.

How many people are refinancing residential mortgage with P2P platforms? None. Why are most real estate P2P platforms targeting commercial developments/mortgage/real estate developers and not single family homeowners? It is all about interest rate spread.

When your mortgage was 11.5%, how many financial institutions were pushing you to take the credit cards or unsecured loans? Very few because there was no incentive for institutions (spread was too small between interest rate on unsecured and secured loans and low risk government and corporate bond) to issue credit cards/unsecured loans.

Extrapolating your personal experience to apply to the larger world can lead you wrong way. There will always be borrowers and lenders but why would they go with P2P platform versus another sources. Barring any other value prop, borrowers will always gravitate toward lower interest rate and lenders will gravitate toward higher return/lower risk.

Anil, there have always been borrowers and lenders.  As rates rise, the cost of money from traditional sources will go up, too.  This medium exists for borrowers as a place below bank unsecured loan rates (when the banks will provide them) and above where investors are able to find returns other than equity shares.  As the bar moves, LC rates will have to move with them to stay competitive on both sides.  When I bought my first home, we paid 11.5% for the mortgage.  No one would think of paying that now, but in 1989, that was the going rate.  There will always be someone able to pay it, and someone willing to lend it.  Sorry, not buying that argument.
You missed the point Anil.  I was not talking about "personal experience" as much as pointing out that we all respond to the market conditions that we are in.  People borrow from LC for many reasons, not just rate, including:

- ease of access to unsecured credit (many self employed have given up going after bank credit and many banks simply don't issue it, to even 800+ scores)
- consolidation to reduce payments (sometimes wisely during temporary cash flow issues, sometimes unwisely due to not seeing trouble on their horizon)
- investment in something that will produce more for them over time, like a business

Being myopic and focusing on interest rate alone won't tell the whole story either.  It is easy to predict doom and gloom for any marketplace.  But as I said, there have always been borrowers and lenders.  The nature of who is doing which and why may change, and LC may have to change product offerings to respond.

Fred

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Re: FYI: 4 Reasons To Avoid LendingClub Stock
« Reply #17 on: December 16, 2014, 10:04:42 AM »
Divisor and dividend were reversed, Fred.  Not only can do the math, but I know the terms.  ;)

You were taking my simple question too personally?

I was genuinely interested in knowing where you got your degree.  Nothing beyond that.

avid investor

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Re: FYI: 4 Reasons To Avoid LendingClub Stock
« Reply #18 on: December 16, 2014, 10:28:52 AM »
Divisor and dividend were reversed, Fred.  Not only can do the math, but I know the terms.  ;)

You were taking my simple question too personally?

I was genuinely interested in knowing where you got your degree.  Nothing beyond that.
Nah, it's all good.  SUNY at Potsdam.  :)