Author Topic: Email from Lending Club  (Read 18709 times)

lender90530

  • Newbie
  • *
  • Posts: 25
    • View Profile
Re: Email from Lending Club
« Reply #15 on: June 03, 2016, 01:28:53 PM »
I agree with you concerning the BRV. For those of us who do not want to take equity like risk on a startup without the potential for equity like returns, LC is a lousy deal. That's why I am moving to Prosper.

SLCPaladin

  • Full Member
  • ***
  • Posts: 202
    • View Profile
Re: Email from Lending Club
« Reply #16 on: June 03, 2016, 03:19:33 PM »

2. This is not a run on the bank (especially if you don't think there are any systemic issues). Like stocks, these are not FDIC insured and everyone was fully aware of the risk when investing so no need to change the rules in the middle of the game. You want FDIC insurance go to the FDIC insured joint.


Yes, this is of course not a run on the bank. Nevertheless, there are similarities. When a run on the bank occurs, people fear the worst-case-scenario and it is their combined actions that work as a self-fulfilling prophecy to create a vicious, downward cycle. Likewise, if sufficient investors are spooked and it leads them to all collectively hit the pause button, this will create a huge dip in LC originations. That, in turn, will drastically reduce profitability and cause LC to bleed cash. So even though LC has a huge balance sheet and is healthy, and even if there are nothing amiss in the quality of the loans, if investors merely believe there is a problem at LC and act accordingly, they may unwittingly create the very problem they hoped to avoid. It is a self-fulfilling prophecy. That is why I believe a bazooka (BRV) is needed.

I don't mean for this to be a jab at the industry; I am a huge believer in the P2P model. But I only believe if everyone else believes.  So right now I'm the guy on the sidelines saying, "You jump in the water first and tell me how it is." I'm going to wait until next quarterly results and see what the impact has been to originations before I deploy more capital or reinvest in LC notes. I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio. In the meantime, I will shift new investments over to Prosper because of the BRV. Paradoxically, if enough people are taking the same approach as I do, it creates the very negative outcome that is in none of our interests.
« Last Edit: June 03, 2016, 03:26:10 PM by SLCPaladin »

Fred93

  • Hero Member
  • *****
  • Posts: 2136
    • View Profile
Re: Email from Lending Club
« Reply #17 on: June 03, 2016, 04:07:26 PM »
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
« Last Edit: June 03, 2016, 04:43:10 PM by Fred93 »

rawraw

  • Hero Member
  • *****
  • Posts: 2759
    • View Profile
Re: Email from Lending Club
« Reply #18 on: June 03, 2016, 04:52:27 PM »
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
If only it was that simple.  Ask any investor who bought a stock because of the cash on the balance sheet how quickly management can squander it, if they so choose to do so.

AnilG

  • Hero Member
  • *****
  • Posts: 1088
    • View Profile
    • PeerCube
Re: Email from Lending Club
« Reply #19 on: June 03, 2016, 05:35:50 PM »
In May, Lending Club new loan listings were down 40% on retail platform from April. Also, the retail demand was soft in May as suggested by higher number of average total loans on the platform. At Prosper new loan listings were up 6.8% on retail platform from April. The retail demand was also soft at Prosper. I posted the charts for monthly new listings and average total loans on platforms to my Twitter feed https://twitter.com/anilkg. This should give you a good benchmark how things are going on the retail platforms for Lending Club and Prosper at least. Based on the news reports and emails, it appears LC management is doing quite a few different things (making the right moves) to shore up funds for originations and trying to minimize using cash on its own balance sheet for loan originations.

Prosper has retail BRV. Prosper has never been about retail lenders since Prosper 1.0 days. It is more focused on institutions. Retail will always be second unless management changes focus. While LC management claims that allocation to whole and retail platforms are random, Prosper has never made such claims. Prosper also doesn't have strong enough secondary market. Retail tools on Proser platform are lacking  Shifting from LC to Prosper most probably not going to gain you much.

I don't mean for this to be a jab at the industry; I am a huge believer in the P2P model. But I only believe if everyone else believes.  So right now I'm the guy on the sidelines saying, "You jump in the water first and tell me how it is." I'm going to wait until next quarterly results and see what the impact has been to originations before I deploy more capital or reinvest in LC notes. I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio. In the meantime, I will shift new investments over to Prosper because of the BRV. Paradoxically, if enough people are taking the same approach as I do, it creates the very negative outcome that is in none of our interests.
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

SLCPaladin

  • Full Member
  • ***
  • Posts: 202
    • View Profile
Re: Email from Lending Club
« Reply #20 on: June 03, 2016, 07:14:40 PM »

Prosper has retail BRV. Prosper has never been about retail lenders since Prosper 1.0 days. It is more focused on institutions. Retail will always be second unless management changes focus. While LC management claims that allocation to whole and retail platforms are random, Prosper has never made such claims. Prosper also doesn't have strong enough secondary market. Retail tools on Proser platform are lacking  Shifting from LC to Prosper most probably not going to gain you much.


Good points Anil. I have had a great run with LC and generally agree with your sentiment: LC has been more retail investor focused. I have accounts at both Prosper and LC. I slowly shifted away from Prosper a few years ago because the volume was so thin and I could never find loans I liked. The only thing Prosper has on LC is the BRV. But right now, that seems to be a strong selling point. But to your point, LC has traditionally been more retail-investor focused. I may just hit the pause button altogether with this asset class until the picture becomes clearer.

sommers

  • Jr. Member
  • **
  • Posts: 77
    • View Profile
    • Email
Re: Email from Lending Club
« Reply #21 on: June 04, 2016, 04:52:52 PM »
I received this email yesterday as well. Here are my thoughts:

1. This offer is certainly better than a sharp stick in the eye, but it essentially skirts the issue that, I believe, is top-of-mind for most retail investors. I actually quite appreciate that there is some sort of enticement to lure back skittish retail borrowers. It shows that management is actively trying to reach out. What's more, adding 2% to my yield is nothing to sneeze at. But at the end of the day, like many on this forum have pointed out, the offer doesn't address the fundamental issue of no BRV being in place for the retail investor. When I analyze my own financial situation, this is still the overarching concern which prevents me from returning to buying loans. As great as this 2% may be, the "unknown unknowns" (it's the uncertainty, stupid) of what my notes would look like if things get ugly fast outweighs a 2% bump in yield. That is how I see it, anyway. Others may feel different, or have a different risk tolerance.

2. While this may not lure me back to reinvesting, let alone incite me to deploy large amounts of new capital, hopefully this carrot is sufficient for enough retail investors to prevent a massive funding shortfall that creates a further self-defeating crisis of confidence. Let's face it, what we're essentially dealing with is a classic run on the bank, or crisis of confidence. I don't think there are any major systemic issues (although I could be wrong) that suddenly went into play a few weeks ago. If all institutional investors and retail investors suddenly decided to start reinvesting all at once, then the RL affair and all the drama that it entails would be a blip on the radar screen. What we are dealing with is a crisis of confidence. The FDIC is in place to prevent bank runs. A BRV is the type of vehicle that is needed to prevent a crisis of confidence for some segment of retail investors. When all is said and done, this RL debacle could turn out to be a blessing in disguise in that it awakens the board and upper-management to the need to think long and hard about funding sources in crises situations. When Mario Draghi promised to "do whatever it takes" to stop the Euro-zone crisis, it had the intended effect of stopping the panic and prevented the ECB from doing a lot more. Mr. Sanborn needs to heed lessons from the past 8-9 years and come out with what is effectively bazooka, not just an enticement to pad returns. In a panic, investors are more interested in return of investment than return on investment.

3. I don't see what is happening behind the scenes. I don't know what the temperature is among other retail  investors, or what funding shortfalls may, or may not, exist. It may very well be that many retail investors are somewhat oblivious to what has transpired in the past few weeks and are reinvesting as if nothing ever happened. I may be a minority voice, I don't know for sure. If this is the case, then the 2% enticement may essentially do the trick. LC has all the data on their investors and they can measure the impact of their communication and offer. If this is enough to right the ship, then maybe LC is right to focus on the silent majority and not the vocal minority. If, however, this forum is a proxy for a wider cross-section of LC investors, LC may need to rethink their approach to shoring up confidence.

This "offer" is nothing.  It doesn't address my concern/s.  I have been liquidating for three weeks. I suspect I am not alone. This scandal has taken LC note investing off my investment list.  I am embarrassed to admit I had no idea how vulnerable my $ were in these notes.   Plus I see clouds on the horizon---the new sub prime loan scandal is in autos.  I would have to think that a lot of these note borrowers are financing more than just the credit card debt they claim with LC notes.

Rob L

  • Hero Member
  • *****
  • Posts: 2040
    • View Profile
Re: Email from Lending Club
« Reply #22 on: June 04, 2016, 08:10:38 PM »
Stand in line with the embarrassment thing.  I mentioned LC to my nephew a few years ago. We don't get to visit much as he lives on Long Island and I'm in Virginia. My Mom lives up there and I went for a visit in February. The subject of LC came up and the next thing you know I'm helping him get an account set up. Fast forward to May, he's just about fully invested and I have to make the call.. "maybe we should slow down on this a bit, the CEO's been fired by the BOD for not being "forthcoming" and, well, ..... ". My brother-in-law was always skeptical so it's egg on face time. It's a very small deal though. My brother-in-law and I are very close and I will personally guarantee my nephew comes out whole. Still... embarrassing! (And no, if you're thinking I might have gotten an incentive from LC for the reference. I didn't).

Meanwhile LC has done absolutely nothing since 5/9 to make me reconsider exiting the playing field. (I'll help my nephew do the same; with apologies to him and my brother-in-law).

RT45

  • Jr. Member
  • **
  • Posts: 93
    • View Profile
Re: Email from Lending Club
« Reply #23 on: June 04, 2016, 08:58:56 PM »
Same boat as you Rob L.

I feel like for every person on the forum, there is a 3-5x multiplier of people they talk about LC with.

In the previous era, LC was like an investment club where everyone could do it together and had a community aspect. Not so much anymore.


Fred93

  • Hero Member
  • *****
  • Posts: 2136
    • View Profile
Re: Email from Lending Club
« Reply #24 on: June 04, 2016, 09:06:20 PM »
I need to know that LC's cash burn rate won't exceed the remaining life cycle of the notes my portfolio.

You already know that.   Look at their quarterly expenses.  Look at their cash.  Do arithmetic.
If only it was that simple.  Ask any investor who bought a stock because of the cash on the balance sheet how quickly management can squander it, if they so choose to do so.

Yes, it is possible for management to squander assets of a company.  So how on earth do you sleep at night owning common stocks of any company?  By your logic, we should own no stocks for fear that all assets can be squandered.

Here we have something much safer than common stocks.  We're at the top of the balance sheet, rather than at the bottom (ie common stocks), and completely covered by loans on the asset side.  Wow.

I see so much irrational fear.  Its real ... but its irrational.

RT45

  • Jr. Member
  • **
  • Posts: 93
    • View Profile
Re: Email from Lending Club
« Reply #25 on: June 04, 2016, 10:02:24 PM »

Fred93

  • Hero Member
  • *****
  • Posts: 2136
    • View Profile
Re: Email from Lending Club
« Reply #26 on: June 04, 2016, 11:15:34 PM »
@Fred93  https://en.wikipedia.org/wiki/Butterfly_effect

Sorry, but that comment is pretty far disconnected from the topic of discussion.  So much that it reminds me of
https://en.wikipedia.org/wiki/Chewbacca_defense

nmay2k

  • Newbie
  • *
  • Posts: 49
    • View Profile
Re: Email from Lending Club
« Reply #27 on: June 04, 2016, 11:27:03 PM »
Sure everyone was taken aback about the resignation and the backdating and sure they would probably try to handle that better given the impact by the way they handled it. LC has enemies and always did. The banks! The banks always bad mouthed them. They tried to partner with the banks sort of like Chamberlain..... but guess what, at the first opportunity these guys will pull a Julius Cesar. So, think of Citi who gets 18% on the credit card and lost this lucrative payment to LC who refies the loan at 13%. Do we really think Citi is going to lend a helping hand to LC? Do we think any bank with credit cards at 18% rate is going to help LC? Are the banks toasting LC's demise right now? Sure. Are they going to compound suspicion on LC? Sure.

But look at their actions rather than their moving lips. Is anybody really liquidating their LC notes? No, way. Sure hit the pause button if you want. More loans for the rest of us. But  no one is really pulling out. They just like to pretend that they are. They want some kind of concession, higher rates, higher security, higher bonuses or have LC evaporate from existence.

There are 16,078 $100 notes for sale on folio. The max markup is 15% and the max mark-down is -8.99%. (Funny to think that they might sell at a 15% mark-up). The median mark-up is 1.41% (half are above that and half are below that) and about 20% (3,200 notes) are priced below 0% mark-up and 6% (900) are priced below -1% mark-up. Amazingly 80% think they can liquidate without giving the buyer an incentive. First time I heard of a liquidation sale with prices above list. I suppose if you want to sell your equity stock quickly (as the market drops) just price it at 1.41% above the market price right?

LC is not going anywhere to the dismay of the banks. But if the banks can rob of rattle LC's retail investor, and even perhaps rattle the guy wanting to refi that 18% credit card payment, then all the better for them. I am not sure sitting on the sidelines is productive in any way. Either get out of the game (go to Prosper, go to Ally, got to a CD, go to the stock market which I really do not recommend) and help the banks take LC down or get in.
 

smihaila

  • Newbie
  • *
  • Posts: 32
    • View Profile
    • Email
Re: Email from Lending Club
« Reply #28 on: June 05, 2016, 12:17:35 AM »
I don't know why I get this odd feeling that you are actually an LC employee posting here?

fliphusker

  • Sr. Member
  • ****
  • Posts: 463
    • View Profile
    • Email
Re: Email from Lending Club
« Reply #29 on: June 05, 2016, 04:29:52 AM »
I don't know why I get this odd feeling that you are actually an LC employee posting here?
It is just that not everyone is panicking or even overly concerned. He is just saying the quite a few of us right now are feasting on folio