How worried are you about LC future?

[michael49]

Part of the problem is I don't think the LC business model is very robust [even before all of the recent events], it relies on massive expansion of loan originations and doesn't seem to be very profitable with its current fee structure.

Judging how "profitable" a business can be is difficult when you haven't observed it in steady state.  If you look at revenue and expenses at LC, you are looking at the expenses needed to GROW BY ABOUT A FACTOR OF TWO EACH YEAR.  To grow that fast you have to hire a lot of people, rent a lot of space, etc that you don't need right now, but need to put in place to handle the coming growth.  You also have to spend money on marketing to draw in much more business than you have now.  If, on the other hand, you reduce your growth objectives, then costs can come way down.

Of course near  term they're going to have a big dip in revenue.  After that is over, it might make a lot of sense to slow down the expansion goals.

Exactly. I disagree that in order to be profitable that LC relies on "massive expansion of loan originations" - that is true if it feels the need to grow quickly but that has more to do with stock price than profitability. 

[LonghornSF]

The problem is that the P2P model is simply not that profitable in its current iteration. It costs too much to acquire customers and retention rates are very low. I think LC can be profitable, but I don't think it's going to be a great business in its current form. They need to create other, more lucrative products or find ways to charge investors or other parties more.

[jz451]

The problem is that the P2P model is simply not that profitable in its current iteration. It costs too much to acquire customers and retention rates are very low. I think LC can be profitable, but I don't think it's going to be a great business in its current form. They need to create other, more lucrative products or find ways to charge investors or other parties more.

It would help if they could educate potential investors better about the expected return and how the investment process works. If they could offer a fund on the investing platform so people can automatically be diversified without choosing notes that would be beneficial to a majority for people who might want to invest, but don't know how and want to be very cautious. They also need a better way to advertise, like frankly showing commercials on CNBC would be beneficial since many people watch shows on the network all day every day instead of essentially relying on word of mouth.

[HalfABubbleOff]

Not worried about LC's future. 
1) They receive a small amount of cash from every payment to service the loan, so regardless if they do not issue a single new loan there is at least some positive cash flow from recurring payments.
2) New notes can only be funded if they reach the 60% threshold (or whatever percentage it is now).  LC could, in theory drop that % down to get more loans funded albeit at lower total origination fee.
3) LC apparently has already extended the amount of time for new loans to get funded, and if they haven't then they should.
4) The debt they currently have is only related to the loans they have provided and are backed up by the investors.
5) They have access to large sums of cash at this point.
6) Other lenders could swoop in and make a target of LC for takeover attempts.  The customer list is worth money alone, the loan servicing is worth money, there are cash flow streams even if the loan origination comes to a temporary or long term halt.
7) The SEC and NY subpoenas are troubling, but also expected, I doubt they'll find much, but never know. 

[Rob L]

Nice to see a poll that had 50+ respondents.