Author Topic: LC getting desperate for funding? "We're Here to Answer Any Questions" email  (Read 11211 times)

Fred93

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My understanding is that they no longer can finance new loan originations because their capital sources (institutions and little guys) have stepped back.  Can't loan what you don't have.

"can no longer finance" sounds ominous.  What is really going on is that with some investors pulling back, origination volume will go down some.

We have had a series of quarter over quarter 15% increases, like clockwork, until Q1 which only went up 6% from the prior quarter.  I'm predicting that loan origination volume will be down 30% to 50% Q2 vs Q1.  This isn't the end of the world.  Its like stepping back in time 1 year. 

nonattender

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Its like stepping back in time 1 year.

And you said a time machine was an irrational ask... ;)
A little nonsense now and then is relished by the wisest men.

Lovinglifestyle

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I note the perception/reality that LC's been so unresponsive to retail it now makes us think something is wrong if they deign to talk to us!

That says a lot...  Glad they're talking (and maybe listening), though...
Why do you perceive it as something negative for them to respond?  Retail has absolutely been on the back burner for LC for quite sometime while focusing on whole and institutional aspects.  Retail is such a small part of their business in Q1.
This said, they will need to expand their retail part to make up for the big boys pausing their buying of notes.

Well, they had better move it to the front burner.  Their lame response to us small people---reinforces my decision to exit this crap ASAP.  I've been letting my notes run off for the last three months even before all of this.  I'm sure the secondary market is a buyer market --and I'd get killed trying to move my inventory there.  These people need to make some bold initiatives to assure/insure the retail investor----they are already late on this.  Lip service will not help them.  I'm sure I'm not atypical
With their big boys on pause, they are still absolutely on the front burner to woo that kind of money back.  We may have been moved to the lil burner for sauce pans though.  I do not see their responses as lame at all.  Feel it is a genuine move to reassure us of their position with us.  When was the last time your cell or cable company called you when you complained about service?  Ya apples and oranges, but you get my drift.
FOLIO is such an odd place, same note can be listed from -4 to +6, for example.  But as far as getting killed, that is also relative.  If you want your principle back that is left on your notes, easily done without taking a loss on principle.  If you want the actual value with interest included, probably not going to happen often.  The FOLIO guys could tell you more, but from reading, they would never pay a premium for a note on FOLIO.
nmay-I have to disagree there. I just snatched up a number of notes with no IGP or late, E2-5 for -6+ that meets my stringent filters.  Can't imagine the number out there that do not meet such strong filters.

Sounds like you may have bought some I sold a few days ago.  One reason I don't spend time looking for notes to buy on Folio is I don't know when I'd be buying back a note I already used to own, lol!

rawraw

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My understanding is that they no longer can finance new loan originations because their capital sources (institutions and little guys) have stepped back.  Can't loan what you don't have.

"can no longer finance" sounds ominous.  What is really going on is that with some investors pulling back, origination volume will go down some.

We have had a series of quarter over quarter 15% increases, like clockwork, until Q1 which only went up 6% from the prior quarter.  I'm predicting that loan origination volume will be down 30% to 50% Q2 vs Q1.  This isn't the end of the world.  Its like stepping back in time 1 year.
Not so sure the entire income statement will be stepping back in time.  I suspect the expense line item will not be as historical.

Fred93

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Not so sure the entire income statement will be stepping back in time.  I suspect the expense line item will not be as historical.

Absolutely agree.  The revenue line could drop 50% (plus or minus 20%), but the expenses line will be up from last quarter, unless they have a layoff very soon.  Even if they hired no additional people in Q2, salary expenses in Q2 would be higher than Q1, just because of people who were hired during Q1 who are in the Q1 number for a part of the quarter, but will be in the Q2 number for the entire quarter.  On top of this, I believe they were still hiring at the beginning of Q2.  For both these reasons, expenses will be higher in Q2 than Q1.  Even if they had a layoff now, we're half way thru Q2, and with required notification time and severance pay and whatnot, it is too late to make Q2 employee expenses go down.  Therefore Q2 income statement will show a substantial loss.

An $80M loss for the quarter is possible, which would be around $0.21/share.

I would imagine they've issued the usual memos about cutting capital expenses, reducing travel budgets, etc, but frankly, you can't reduce expenses very much without reducing staff level. 

Note to folks worried about bankruptcy:  I know there are a lot of you.  You should not interpret the above statement as having anything to do with bankruptcy concerns.  LC had $868M in cash at beginning of Q2.  If they lost $80M in the quarter, they'd still have $788M in cash.  (Approximately, because some other things can change this number a bit.)  Still a very nice cash position on the balance sheet.  Still very very far away from bankruptcy.  They have the resources to live thru a substantial dry spell.

jheizer

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Replacement to P2P Quant's Percentile Tool http://lc.geekminute.com

Fred93

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Only 99 job listings right now... http://chj.tbe.taleo.net/chj06/ats/careers/jobSearch.jsp?org=LNDC&cws=1

Quite a few listings!

Surely hiring is frozen at this point.  Perhaps they decided to keep the pipeline open in the case that big bank volume recovers soon.  The pipeline is 2-3 months long.  (Get resume, select resumes, schedule interview, have interview, interview others, make selection, make offer, wait for other offer, negotiate offer, reject offer, start over ...)

The only thing that has been made public is the cancellation of this year's summer intern program.  I would expect turning off temps and a general hiring freeze to occur at the same time.

Maybe they need another week to let events sink in?

LonghornSF

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I read that they cancelled their summer intern program, so that's one step. Leaving the interns high and dry is a pretty crappy move on LC's part though in my opinion. They're going to need to cut some engineers and other highly paid employees to really get expenses down.

The other thing to consider is you have a whole lot of employees who just saw their option "income" go up in smoke. If LC wants to retain the good ones LC will need to cut a new options deal with them, as they did with Sanborn. The rest are SOL unfortunately. I wonder what morale is like there these days. Have to be a whole lot of pre-IPO employees that are now royally pissed.

Fred93

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From the 10K
Quote
At December 31, 2015, we had 1,382 employees and contract employees.

I don't know how many employees they have now.  Maybe 1500?  They need to cut maybe...
10% = 150
20% = 300
30% = 450

The intern program was tiny.  Has almost no effect on the bottom line.  Much harsher things have to happen.

I base this on very simple reasoning.  Revenues are down, and are not going to recover instantly.  Might take a couple of years to rebuild trust.

dompazz

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Cutting the intern program makes sense, even it is not a large cost.  You have federal investigations and are under intense scrutiny by the press.  The last thing you want is a low paid intern to get access to sensitive information and share it with the world.  I saw it as a "closing ranks" move, not a cost savings move.

LonghornSF

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The intern program was tiny.  Has almost no effect on the bottom line.

This is exactly why cutting it makes no sense. Moreover, they've really damaged their relationship with several years worth of potential MBA recruits. Long term thinking doesn't appear to be happening at LC at the moment though.

Fred93

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Cutting the intern program makes sense, even it is not a large cost.  You have federal investigations and are under intense scrutiny by the press.  The last thing you want is a low paid intern to get access to sensitive information and share it with the world.

I don't favor such theories. 

Cutting the intern program made sense because it was a cost that could be easily cut, without much pain, and it would have been a considerable pain point later, presuming the likelihood of a wide-scale staff reduction in the near future.  Interns would be arriving this summer as long-term employees are losing their jobs. 

For the interns, it is much better to tell them well in advance of their arrival, as LC did, rather than after they get to San Francisco!

rawraw

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Maybe marketing spend will come down due to all the free press?  ha ha

Rob L

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Maybe marketing spend will come down due to all the free press?  ha ha

The Trump approach.

Fred93

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Maybe marketing spend will come down due to all the free press?  ha ha

LC's marketing is mostly to attract borrowers.  Because demand for loans is down right now, they have surely scaled such marketing way back.  So marketing costs should come down.

However, legal costs ... going way way up.