Author Topic: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc  (Read 4511 times)

Fred93

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http://ir.lendingclub.com/file.aspx?IID=4213397&FID=34897080
The meat of which is ...
Quote
In addition to the formal business related to its Annual Stockholder Meeting ("Annual Meeting"), Lending Club will be addressing the following topics during its Annual Meeting call and webcast which occurs today at 11:00 a.m. Pacific Time (Tuesday, June 28, 2016, - see webcast and conference call information below):

    CEO and Independent Chairman Appointments - Lending Club announced that the company's Board of Directors has appointed Scott Sanborn as CEO and President and that Hans Morris has assumed the role of independent Chairman of the Board.

    Substantial Conclusion of Internal Review, Two Items Identified - The first item related to adjustments to the valuation of assets held by six private funds managed by LC Advisors ("LCA") that were not consistent with generally accepted accounting principles and impacted net asset values and monthly return figures for the LCA funds. In response, Lending Club and LCA engaged an independent valuation firm, with specific expertise in the valuation of marketplace assets, to provide valuation services to the LCA funds, and Lending Club and LCA have made several changes to improve governance of the funds, including establishing a majority independent Governing Board. The second item related to loans made in December 2009 to the company's former CEO, and three of his family members.

    Q2 Origination Volume, Incentives and Certain Expenses - Investors continue to return to the Lending Club platform to invest in loans since pausing in early May. Based on quarter to date originations, the company expects loan originations in the second quarter of 2016 to be roughly one third lower than in the first quarter of 2016. In addition, the company expects to report investor incentives of roughly $9 million, $15 - $20 million of additional expenses related to employee retention, employee severance, advisory relationships, board review, remediation and due diligence activities, and a goodwill write-down of between $20 - $40 million related to slower growth expectations for Springstone, subject to finalization of this analysis.

    Organizational Changes - In light of lower loan volumes in the second quarter and recognizing that fully restoring investor confidence may take time, the company has decided to reduce 179 positions in the organization.

    Progress on Controls, Compliance and Governance - Over the last seven weeks, Lending Club initiated a comprehensive review of its controls, compliance and governance and has taken actions that included implementing KPMG best practice recommendations; increasing testing of data changes; increasing compliance and oversight resources; aligning business and control functions into a better risk management structure; and retraining employees on code of conduct and ethics and reinforcing the importance of a high compliance culture.

    Key Second Half of 2016 Drivers - In an effort to reignite the platform, Lending Club provided several investor incentives (to both retail and institutional investors) most of which are expected to continue into the third quarter. The company expects to transition away from these incentives in the fourth quarter and plans to resume revenue and EBITDA growth in the first half of 2017.

    New Policies on Anti-Pledging and Ecosystem Investing - Lending Club's Board has established new policies prohibiting pledging of Lending Club shares, and prohibiting the company from making investments in ecosystem partners that invest in Lending Club loans.


There's a little more detail in the version that LC filed with the SEC (form 8K) this morning...
https://www.sec.gov/Archives/edgar/data/1409970/000140997016002330/form8-kfiledon62816project.htm


Wall Street Journal version (paywalled)...
http://www.wsj.com/articles/lendingclub-to-cut-179-positions-as-loan-volumes-fall-1467111409
Quote
LendingClub Corp. said Tuesday that it would eliminate about 12% of its workforce
If 179 people is 12% of the workforce, then they had 1492 employees prior to the cut.  This is only recent employee count I've seen.  Most recent I had until this was 1382 from the 2015 10K, which was an end-of-2015 number.  1492 from 1382 is 8% growth, which is reasonable, given that the company had been roughly doubling originations each year, but saw conditions change during 2016Q1.  The fact that they only went up 8% during the first half of 2016 means they did realize that demand was slowing, and took action.  1492-179 = 1313, which will put them a little below the end of 2015 number. 


And for those who want a little less information, here's the bullet points from Reuters...
http://www.reuters.com/article/idUSASC08VFW
Full text below...

Lending Club Corp

* Lending Club names Scott Sanborn CEO

* Lending Club Corp says Hans Morris, who had assumed temporary role of executive chairman, has assumed role of chairman of board of directors

* Company expects loan originations in Q2 of 2016 to be roughly one third lower than in Q1 of 2016

* Plans to resume revenue and ebitda growth in first half of 2017

* Company has decided to reduce 179 positions in organization

* Company plans to resume revenue and ebitda growth in first half of 2017

* Lending Club Corp says in addition, company expects to report investor incentives of roughly $9 million

* Expects to report investor incentives of roughly $9 million, $15 - $20 million of additional expenses related to employee retention in Q2 2016

* Expects goodwill write-down of between $20 - $40 million related to slower growth expectations for springstone in Q2 2016

* "initiated a comprehensive review of its controls, compliance and governance"

* Provided several investor incentives (to both retail and institutional investors) most of which are expected to continue into Q3

* Company expects to transition away from these incentives in Q4 and plans to resume revenue and ebitda growth in first half of 2017

* Says board has established new policies prohibiting pledging of lending club shares

* Lending Club says board has established new policies prohibiting co from making investments in ecosystem partners that invest in lending club loans

* "substantial conclusion of internal review, two items identified"

* First item related to adjustments to valuation of assets held by 6 private funds managed by LC advisors that were not consistent with GAAP

* Lending Club, LCA engaged independent valuation firm, with specific expertise in valuation of marketplace assets

* Lending Club, LCA have made several changes to improve governance of funds, including establishing a majority independent governing board

* Second item related to loans made in December 2009 to company's former CEO, and three of his family members Source text for Eikon: Further company coverage:
« Last Edit: June 28, 2016, 08:03:54 AM by Fred93 »

PhilGD

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #1 on: June 28, 2016, 09:39:06 AM »
From the SEC filing:

(I legitimately laughed at this one)
Quote
Second, the Company identified 32 loans made in the second half of December 2009 through the Lending Club platform, totaling approximately $722,800 in originations and $25,000 in revenue, to the Company’s former CEO, Renaud Laplanche, and three of his family members. All but three of these loans were repaid in full in January and February of 2010, with the remaining three loans held to maturity and paid in full. The Company’s review has found that these loans were issued in order to help increase reported platform loan volume for December 2009. Based on the review, the Company is confident that there are no other situations in which Mr. Laplanche inappropriately originated loans in his or his family’s name during periods after December 2009.

and

Quote
In addition, as previously disclosed, at December 31, 2015, the investment parameters of one of the LCA Funds, with respect to the allocation of 60-month loans, were exceeded. The Company’s review has found that this was due to non-adherence to the fund’s investment strategy, including in part due to the purchase of loans in the first quarter of 2016 that were about to expire on the Lending Club platform.

Not surprised at this one, but from LC's point of view there was nothing wrong with the loans they were buying.


LonghornSF

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #2 on: June 28, 2016, 02:13:02 PM »
There's no way to spin any of these announcements as good news. The last two points look particularly bad for RL. Borrowing $1mn on the LC platform so they can presumably hit some loan growth target? LCA buying loans that are about to expire to also hit growth targets? We've certainly learned a lot about RL's character over the past few months. I wouldn't trust him with a dime.

Fred93

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #3 on: June 28, 2016, 02:24:14 PM »
There's no way to spin any of these announcements as good news. The last two points look particularly bad for RL. Borrowing $1mn on the LC platform so they can presumably hit some loan growth target?

Translation: SEVEN YEARS AGO, an employee and some family members took out some loans from A LOAN COMPANY and PAID THEM BACK.  Long time ago, and normal business.  However, at odds with current (better) philosophy of avoiding self-dealing or appearance of same.  Not really very exciting.

The good news is that they have completed their forensic auditing and whatnot and didn't find anything serious.  Found a number of things where financial controls were not best, and are cleaning up this stuff. 

jheizer

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #4 on: June 28, 2016, 02:27:05 PM »
Call was pretty unexciting.  Nothing really new or detailed over what was said above.
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Fred93

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #5 on: June 28, 2016, 02:34:55 PM »
That was the stupidest shareholder meeting ever. 

jheizer

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #6 on: June 28, 2016, 02:35:33 PM »
They almost sounded as bored as we were.
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fliphusker

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #7 on: June 28, 2016, 04:14:01 PM »
Too many thought the sky was falling, again,  when shareholder meeting pushed back.   Guess I am not so pessimistic.

investny

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #8 on: June 28, 2016, 05:13:01 PM »
I was hoping for BRV announcement

Rob L

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #9 on: June 28, 2016, 06:01:39 PM »
The fact that they "outed" this 2009 thing appears to me as a strong positive. Narrative:
"Look, we hired the best auditors and bloodhounds, gave them free reign, and this is what they found. You be the judge."
If the bloodhounds found nothing then who knows; but they found a flea on a flea from a bygone era.
So, they either really looked hard and found almost nothing, or they were set up with a nothing finding to make the case there is almost nothing to find. Personally I'll go with the former but when this much money is involved who knows ...

lascott

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #10 on: June 28, 2016, 06:03:44 PM »
There's no way to spin any of these announcements as good news. The last two points look particularly bad for RL. Borrowing $1mn on the LC platform so they can presumably hit some loan growth target?

Translation: SEVEN YEARS AGO, an employee and some family members took out some loans from A LOAN COMPANY and PAID THEM BACK.  Long time ago, and normal business.  However, at odds with current (better) philosophy of avoiding self-dealing or appearance of same.  Not really very exciting.

The good news is that they have completed their forensic auditing and whatnot and didn't find anything serious.  Found a number of things where financial controls were not best, and are cleaning up this stuff.
Indeed that was good news for me to hear about as well.
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Rob L

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #11 on: June 28, 2016, 06:35:05 PM »
That was the stupidest shareholder meeting ever.

Gee I'm really glad I didn't bother to listen in.

nonattender

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Re: 06/28/2016 press release - Sanborn now CEO, cut 179 jobs, etc etc
« Reply #12 on: June 28, 2016, 07:54:07 PM »
I didn't bother, either... figured it'd be a locked-down PR event.  That said, the only surprising thing I saw was the 58% of LCA funds redemption number.  That's huge.  I expected maybe 30%.  I have no idea what their funding mix is going to look like, ongoing, now.

ETA:  Wow - per WSJ, "exploring winding down the fund"...  That would reduce a great deal of principal/agent conflict and level the field...  Now they need a BRV.
« Last Edit: June 28, 2016, 08:17:27 PM by nonattender »
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