Author Topic: 10-Q is Posted  (Read 3886 times)

jheizer

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jheizer

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Re: 10-Q is Posted
« Reply #1 on: May 16, 2016, 06:28:05 PM »
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Unfavorable publicity regarding the events described herein has resulted in investors pausing their investments through the platform and may result in, a slowdown in investor demand on our platform.

Wonder how widespread that is.
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jheizer

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Re: 10-Q is Posted
« Reply #2 on: May 16, 2016, 06:29:56 PM »
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In the five business days since we announced our review and resignation of our CEO, we have experienced a slowdown in a significant amount of investment capital available on our platform and may not be able to attract additional investors to invest in loans, or we may need to grant investors significant inducements in order to attract capital or use our own capital.

As a result of the circumstances relating to our internal board review into certain private loan sales to a single institutional investor in contravention of its requirements and other matters, and the resignation of our former CEO, a number of investors that account for, in the aggregate, a significant amount of investment capital on the platform, have paused their investments in loans through the platform in the last five business days. It is possible that these investors may not resume investing through our platform. As a result, we may use a greater amount of our own capital, compared to past experience, to invest in loans.

In order to obtain additional investor capital to our platform, we may need to enter into various arrangements with new or existing investors and we are actively exploring several possibilities. These arrangements may have a number of different structures and terms, including equity or debt transactions, alternative fee arrangements or other inducements including equity. These structures may enable us or third-parties to purchase loans through the platform. Such actions may have a material impact on our business and results of operations and may be costly or dilutive to existing stockholders. There is no assurance that we will be able to enter into any of these transactions, or if we do, what the final terms will be. These actions likely may have material adverse impacts on our business, financial condition (including our liquidity), results of operations and ability to sustain and grow volume. See “Board Review” and “Current Economic and Business Environment” in “Part 1 – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

A relatively small number of investors account for a large dollar amount of investment in loans funded through our marketplace and we may be required to increase our repurchase obligations to attract additional investors.

A relatively small number of investors account for a large dollar amount of investment in loans funded through our marketplace and we may be required to increase our repurchase obligations to attract additional investors. Historically, we have limited our loan or note repurchase obligations to events of verified identity theft or in connection with certain customer accommodations. To attract additional investors, some of which are beginning to purchase loans, and seek to subsequently securitize such loans, we have increased the circumstances and the required burden of proof of economic harm under which we are obligated to repurchase loans from these investors. While these repurchase obligations are consistent with institutional loan market standards, such repurchase obligations could negatively affect our business and results of operation.

In addition, if a large number of our existing investors ceased utilizing our marketplace over a short period of time, our business could be temporarily interrupted and we may decide to use our capital to fulfill regulatory or contractual purchase obligations or support short-term marketplace equilibrium as new investors complete the administrative and diligence updating processes necessary to enable their investments. We may use our capital to invest in loans associated with the testing or initial launch of alternative loan terms, programs or channels to establish a track record of performance prior to facilitating third-party investments in these loans.
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jheizer

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Re: 10-Q is Posted
« Reply #3 on: May 16, 2016, 06:35:07 PM »
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We have identified a material weakness in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements.

During the second quarter of 2016, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.[...] the Company intends to amend its Annual Report on Form 10-K for the year ended December 31, 2015, solely for the purpose of amending management’s assessment of internal control over financial reporting. This amendment will have impact on the financial statements included therein.
 
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mchu168

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Re: 10-Q is Posted
« Reply #4 on: May 16, 2016, 06:37:24 PM »
Shoe just dropped

bobeubanks

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Re: 10-Q is Posted
« Reply #5 on: May 16, 2016, 06:45:39 PM »
LC down 10% after hours.

Rob L

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Re: 10-Q is Posted
« Reply #6 on: May 16, 2016, 06:53:42 PM »
A relatively small number of investors account for a large dollar amount of investment in loans funded through our marketplace and we may be required to increase our repurchase obligations to attract additional investors. Historically, we have limited our loan or note repurchase obligations to events of verified identity theft or in connection with certain customer accommodations. To attract additional investors, some of which are beginning to purchase loans, and seek to subsequently securitize such loans, we have increased the circumstances and the required burden of proof of economic harm under which we are obligated to repurchase loans from these investors. While these repurchase obligations are consistent with institutional loan market standards, such repurchase obligations could negatively affect our business and results of operation.

Reminds me of what happened to banks that sold no doc mortgages to Fanny & Freddy. F&F made the banks take them back (and some banks are still eating them 8 years later). If I hear what they are saying here LC will guarantee the performance of loans sold or the buyer has the right to force LC to buy them back. Definitely eating your own cooking. Am I on the right track here?

dompazz

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Re: 10-Q is Posted
« Reply #7 on: May 16, 2016, 07:13:06 PM »
Page 40
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If our attempts to secure additional investor capital to meet platform origination volume are not successful, we likely may need to use a greater amount of our own capital to purchase loans on our platform compared to prior periods, particularly in light of regulatory commitments to fund loans solicited by direct mail and other contractual purchase obligations.

They have obligations to fund loans.  If there are not enough investors capital to fund those loans, they have to fund them out of the cash on hand. 

Do we have any idea the potential size of that commitment? 

Fred93

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Re: 10-Q is Posted
« Reply #8 on: May 16, 2016, 07:54:52 PM »
Shoe just dropped

Care to elaborate?  I presume you are talking about the announcement that they plan to amend the 2015 10K.

That's a trigger-like event for many people surely, but they say "solely for the purpose of amending management’s assessment of internal control over financial reporting".  If they don't plan to revise numbers I don't see what's the point.  Must be some legal issue that is beyond my understanding.

SeanMCA

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Re: 10-Q is Posted
« Reply #9 on: May 16, 2016, 09:06:22 PM »
The next sentence after that is "This amendment will have impact on the financial statements included therein."
I'm a merchant cash advance veteran exploring the p2p lending waters.

Fred93

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Re: 10-Q is Posted
« Reply #10 on: May 16, 2016, 09:08:47 PM »
The next sentence after that is "This amendment will have impact on the financial statements included therein."

I have some difficulty interpreting that sentence.  I took it to mean that the revised statement about financial controls will apply to the period on which those numbers apply.  I did not take it to mean "oh, and we're also going to change the numbers".  It wouldn't make sense to say "We're SOLELY amending our statement that our controls were cool, oh and by the way, we're also changing the numbers."  What on earth would "solely" mean in that 2nd interpretation?

SeanMCA

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Re: 10-Q is Posted
« Reply #11 on: May 16, 2016, 09:21:49 PM »
Not a great time to be dealing with this kind of ambiguity.  ???
I'm a merchant cash advance veteran exploring the p2p lending waters.

Boatguy

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Re: 10-Q is Posted
« Reply #12 on: May 16, 2016, 10:39:21 PM »
This is legal CYA language for the SEC and anyone trading the stock.  Read the 10Q for almost any public company and you'd wonder why anyone owns stock at all.

Look at their balance sheet, they aren't going away anytime soon.  Long term assets exceed long term liabilities, and they have $750M in cash.

LonghornSF

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Re: 10-Q is Posted
« Reply #13 on: May 16, 2016, 10:47:23 PM »
Nothing too surprising overall. Things that caught my eye:

- they threw RL under the bus when the 10-Q referred to the "tone at the top." Or maybe I should say they backed over him again.

- not too surprised that they called out the loss in funding, but I wonder what their definition of "substantial" is.

- it will be VERY interesting to see what type of "various arrangements with new or existing investors" they pursue to secure funding. Perhaps they give one of their institutional loan buyers a chunk of LC equity in exchange for agreeing to buy a minimum amount of loans? Maybe they do a rights offering? The possibilites are endless but this part doesn't sound great for shareholders

P2PFact

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Re: 10-Q is Posted
« Reply #14 on: May 16, 2016, 11:14:49 PM »
I notice following item in the 10Q: Purchase of whole loans to be sold.

Does this mean LC buy whole loan from WebBank first and then sell them to investors? If they cannot sell them, then they have to hold them?? Then looks to me it's a big problem. This can easily deplete the 700mm cash they have on hand...