Lending Club Exists for the Profits of Whom?

[Rob L]

I've been an unrepentant LC pessimist over the past two years, should anyone be unaware (few are I'm sure).
Each quarter shareholder equity is diluted by non-GAAP compensations to management (big time). Hey, it's not cash so why worry?
When all that money the exuberant IPO buyers gave the company has been distributed to management what will be LC's fate? My guess is that it isn't pretty.
I will leave it up to the optimists to counter. Strong language, but is thinking LC is a dead man walking ...  If not dead zombie like.

http://www.insider-monitor.com/trading/cik1409970.html

[rawraw]

I personally think we need to be careful on this forum to keep several items separate.  LendingClub the stock investment, LendingClub the platform,and LendingClub notes. A lot of the newer people have trouble understanding how they are different and yet related.  I agree with you about the LendingClub stock.  But dead man walking may be a bit much, I think they probably could be profitable if they just stopped spending as much.  Didn't they say in an email couple years ago they could function just based off of the servicing income if they gutted the place?  At any rate, I think LC is similar to a mortgage broker - and that's not necessarily a very attractive business to invest in.

[Rob L]

Yeah, I agree this thread is in the wrong place.
Should be in the General Lending Club Discussion Topic. Most of the stock related posts are there.

Hey Zach -- If you happen to see this post would you move the whole thread as above?

And yeah I guess dead man walking was a bit over the top. I'm sure there are plenty of companies with troubles far worse than LC that have come back, survived and done very well.

[Zach]

Hey Zach -- If you happen to see this post would you move the whole thread as above?

Sure thing - done!

[dr.everett]

I personally think we need to be careful on this forum to keep several items separate.  LendingClub the stock investment, LendingClub the platform,and LendingClub notes. A lot of the newer people have trouble understanding how they are different and yet related.  I agree with you about the LendingClub stock.  But dead man walking may be a bit much, I think they probably could be profitable if they just stopped spending as much.  Didn't they say in an email couple years ago they could function just based off of the servicing income if they gutted the place?  At any rate, I think LC is similar to a mortgage broker - and that's not necessarily a very attractive business to invest in.

I'm your huckleberry...

I'll answer this from a couple of perspectives. First as a (former) notes investor. Taxable account is gone, all that's left are 50% late notes waiting for their turn to die, and 50% notes that still haven't/won't sell. These are the "dead men walking", I just have to wait them out. Not fun, but hey- we'll see what happens. IRA has a lot more to go but the discount to continue selling has risen from .5% discount to 1.5% and will slowly continue to rise until the IRA gets to the same point as the taxable account. Maybe it comes back- maybe it doesn't. I will certainly watch and if it does, I "might" reinvest- but not at the level I did before.
Fundrise has better returns with a lot less effort and risk. Yes the money is stuck for 5 years, but at 10% a year, oh noes...

Now I'll answer as the stock investor- when we lost 15% percent on the earnings call a few weeks back, I said "Damn", and invested more to lower my cost. When we lost another 15% yesterday I said "Sh.." and invested again. Some will say why, that's stupid, etc. My net cost on my shares is $4.37 a share, not counting today's purchasing, and possibly Monday's purchasing. If I can get it closer to $4 a share I'll be happy.

I have done very well in the past with distressed stocks and price swings. One stock in particular- Had close to 100,000 shares of it in the .25 a share range. Managed to catch a $1 swing on it 2x, once on acquisition rumors with a tight trailing sell trigger attached to it, the other time when the company was actually bought. Paid for a lot of things with those swings.

If/When LC gets back to the $6.80 peak it was at before, I'll make about $30K. Anything less than that, but more than it is now, I'll keep a close eye on, set a trailing trigger, and patiently wait. Just like I'm doing while my notes sell.

[AnilG]

So you have decided that LC notes are not good investment but LC stock is a good investment. Interesting juxtaposition. I wonder what part of LC business you are excited about to put more money into LC stock.

I'm your huckleberry...

I'll answer this from a couple of perspectives. First as a (former) notes investor. Taxable account is gone, all that's left are 50% late notes waiting for their turn to die, and 50% notes that still haven't/won't sell. These are the "dead men walking", I just have to wait them out. Not fun, but hey- we'll see what happens. IRA has a lot more to go but the discount to continue selling has risen from .5% discount to 1.5% and will slowly continue to rise until the IRA gets to the same point as the taxable account. Maybe it comes back- maybe it doesn't. I will certainly watch and if it does, I "might" reinvest- but not at the level I did before.
Fundrise has better returns with a lot less effort and risk. Yes the money is stuck for 5 years, but at 10% a year, oh noes...

Now I'll answer as the stock investor- when we lost 15% percent on the earnings call a few weeks back, I said "Damn", and invested more to lower my cost. When we lost another 15% yesterday I said "Sh.." and invested again. Some will say why, that's stupid, etc. My net cost on my shares is $4.37 a share, not counting today's purchasing, and possibly Monday's purchasing. If I can get it closer to $4 a share I'll be happy.

I have done very well in the past with distressed stocks and price swings. One stock in particular- Had close to 100,000 shares of it in the .25 a share range. Managed to catch a $1 swing on it 2x, once on acquisition rumors with a tight trailing sell trigger attached to it, the other time when the company was actually bought. Paid for a lot of things with those swings.

If/When LC gets back to the $6.80 peak it was at before, I'll make about $30K. Anything less than that, but more than it is now, I'll keep a close eye on, set a trailing trigger, and patiently wait. Just like I'm doing while my notes sell.

[dr.everett]

So you have decided that LC notes are not good investment but LC stock is a good investment. Interesting juxtaposition. I wonder what part of LC business you are excited about to put more money into LC stock.

I foresee two potential possibilities right now. In the experience I had with the other stock- it got to a point where it was a cheap acquisition for the buyer. It's stock value popped and I made money on it. I think there's the potential here- that someone with deep pockets may say it makes more sense to buy LC and have a ready-made business needing minor tweaks vs. building their own from scratch.

My second thought is that LC will turn around their existing issues on their own and over the next quarter or two, will return to the price level they were at before. If they do, I also make money.

To your question about why I think the notes are not a good investment right now: The amount of manual work required (lack of automation, tax reporting), lack of return, and stability are the main reasons. In the last year, the main tools I used to ease the workload have drastically changed, or have stopped innovating. The tax reporting requirements are so vague it's ripe audit material, and requires a ton of manual entry. Returns have gone in the tank as many others have seen and reported, and many, many chargeoffs/defaults. I know I'll sound like a Fundrise fanboy saying this, but I'm getting 10% a quarter for no effort at all. I've had no losses, no chargeoffs, nothing. Put the money in- let it sit for 5 years, and watch the interest accrue.

Anil- I would have loved to give PeerCube a try to replace my other tools, but given the other things going on with LC right now, I just don't want to get back into the notes side of things. It's not worth it to me for all the reasons above. I had $250K in notes at my peak and was spending several hours a night doing all the things I felt were necessary to be a successful LC investor. I have that time back now, and the associated stress is gone as well. I'm happier with where I am and the path ahead.

[rawraw]

Fundrise has better returns with a lot less effort and risk. Yes the money is stuck for 5 years, but at 10% a year, oh noes...

I feel like I have the same disagreement on this forum over and over again about how people do not think about investing rationally.   You could have made the exact same statement about LC a few years ago but now it's too risky to hold notes (but fine to buy stock?).  Why invest in X when I'm getting 12% returns at LC... oh noes.  For me, it was virtually riskless because I could see the late notes before they showed up as late.  Despite this, I commonly posted on this forum that people shouldn't buy such risky LC notes without understanding risk.  I suspect you don't understand the risk of Fundrise.  But at any rate, good luck.

[Rob L]

We are blessed to live in interesting times. A cursory but by no means serious look at insider buying and selling (see link above) appears to suggest that the last round of nearly free stock options to corporate management have not been sold after this last downturn into the mid $3's. Not one share. There's even some buying by insiders on the open market, but it's very small money. Seems there is a lot of stock held with a cost basis in the $4.25 range (including the Chinese investor Chen). Not many sellers in the mid $3's, but maybe the $4.25 level will be hard to break on the upside. Anybody want to get out even? The market will tell us in due time.

[dr.everett]

For me, it was virtually riskless because I could see the late notes before they showed up as late. 

I "thought" I was doing okay at filtering for bad notes, between my manual work, automation and selling strategy. I found out as others did, I wasn't seeing bad notes as well as I thought. That's ultimately why I stopped lending.

I respect your thoughts rawraw and would ask what you see as the risk in sites like Fundrise. I know no investment is risk free. To me, an investment like Fundrise that's backed by actual property that can be foreclosed if not paid and some return received seems like a much safer bet than what I personally experienced at LC. I've been in Fundrise now for 2 years- haven't lost any money yet- and about 12 of the properties they invest in for me have completed and paid off. What am I not seeing or considering that you think are key, and that I should be?

As said in my previous post, the time, effort and returns work better for me at Fundrise. Less time to manage, daily effort to maintain, and good returns.

[AnilG]

+1. I remember in 2013/2014 when I talked about risk with LC lending, people laughed at me as they were consistently getting 8-10% return for several years and couldn't believe someone will think LC lending is risky. Even on this forum, people were discussing borrowing from other sources to lend on LC. How times have change. I am pretty sure same will happen to the next new shiny investment people are excited about. It is behavioral investing 101. Common-sense is not common enough. For majority, "return" tail seem to wag the dog.

I feel like I have the same disagreement on this forum over and over again about how people do not think about investing rationally.   You could have made the exact same statement about LC a few years ago but now it's too risky to hold notes (but fine to buy stock?).  Why invest in X when I'm getting 12% returns at LC... oh noes.  For me, it was virtually riskless because I could see the late notes before they showed up as late.  Despite this, I commonly posted on this forum that people shouldn't buy such risky LC notes without understanding risk.  I suspect you don't understand the risk of Fundrise.  But at any rate, good luck.

[pourts]

Fundrise has better returns with a lot less effort and risk. Yes the money is stuck for 5 years, but at 10% a year, oh noes...

For me, it was virtually riskless because I could see the late notes before they showed up as late. 

Are you still able to do this?  If so, how?

[Half Right]

"Fundrise has better returns with a lot less effort and risk. Yes the money is stuck for 5 years, but at 10% a year, oh noes...
For me, it was virtually riskless because I could see the late notes before they showed up as late. 
Are you still able to do this?  If so, how?"


Fundrise will gladly take your money. However please note that the Net asset value for the Income Fund is now $9.80 as opposed to $10 when the fund started. A loss of 2% in the past year. Take that off your 10% distribution and you are inline with most other crowdfunded real estate loans. However your liquidity is restricted and comes with a penalty for early withdrawal.
IMHO better deals exist

[jrr6415sun]

"Fundrise has better returns with a lot less effort and risk. Yes the money is stuck for 5 years, but at 10% a year, oh noes...
For me, it was virtually riskless because I could see the late notes before they showed up as late. 
Are you still able to do this?  If so, how?"


Fundrise will gladly take your money. However please note that the Net asset value for the Income Fund is now $9.80 as opposed to $10 when the fund started. A loss of 2% in the past year. Take that off your 10% distribution and you are inline with most other crowdfunded real estate loans. However your liquidity is restricted and comes with a penalty for early withdrawal.
IMHO better deals exist

what are some better deals?

[Half Right]

Not to say that the biggest is always the best but i like these 2 the most and they are some of the biggest:

1) Cadre- it doesn't hurt to have the current President as a family member (through marriage and blood). At least you get the Tax Code  changed for your benefit.
2) Lending Home- Although they have become way too aggressive in terms of "Loan to Cost" while attempting to retain some some restraint in terms of "Loan to Value", I think this has been caused as a result of their ENORMOUS growth. IMHO the best fix and flippers use them because of their super quick loan funding which gets the properties completed quickly and out on the market in the shortest time possible. What I most appreciate is that if the borrower is late or in default, they will not waste a second foreclosing and auctioning off the property.

Either way as they say in the Real estate biz Caveat Emptor