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It is relatively a small part of my portfolio. I like the company (getting ~6-7% APR with surprisingly very few defaults so far). The fundamentals are improving rapidly by almost any measure. Most of the analysts' outlook have been positive. But the stock has been behaving strange. If you look at the 1 year graph and plot Compass Point recommendation timeline on the graph, there is a very strong correlation. So, it can be either
1) All the other analysts are wrong and its fundamentals are Enron like
OR
2) Compass Point is colluding with banks/financial companies who have a strong incentive to prevent the growth of P2P lending (e.g. by scaring investors from similar future IPOs or future debt instruments for LC itself). If they have big positions which they sell coinciding with the Compass Point recommendations, it would set the price movement downward. Add the short sellers (27% recently), LC becomes a broken stock. (FYI: today's drop was likely related to LendingTree, not LendingClub -- prove the stock market is not perfect.)
That does seem strange. Initial assessment is that debt on the balance sheet is a concern. Is that invested in it's own P2P loans? If so, the company is essentially operating as a bank without a lot of collateral on it's borrowers. That's a concern.
Also looks like they issued $896M in stock in 2014. That's a lot. Investors hate dilution. Not sure of 2015's numbers. Another thing, are there CDS swaps on any bond issuance? Speculators could be driving down the stock to push up the CDS insurance prices. Who knows.
LC is very speculative and it is still way over-valued.
All new companies with new forms of economic models are "over-valued." Even FB and AMZN are overvalued by traditional metrics. The question is not why LC is overvalued but why it is downtrending the way it is especially after each Compass Point's announcement.
That does seem strange. Initial assessment is that debt on the balance sheet is a concern. Is that invested in it's own P2P loans? If so, the company is essentially operating as a bank without a lot of collateral on it's borrowers. That's a concern.
Also looks like they issued $896M in stock in 2014. That's a lot. Investors hate dilution. Not sure of 2015's numbers. Another thing, are there CDS swaps on any bond issuance? Speculators could be driving down the stock to push up the CDS insurance prices. Who knows.
Good point. Is it legal? Is the company required to disclose such information if that's true? SEC should get involved.
Honestly getting a 6-7% APR right now sounds like pure genius. You couldn't get anywhere near that right now holding a CD, Treasuries or High Grade Corporate Bonds. I just took a home loan for my sister at 3.5%.
So....what are you holding?
I'm not sure how they work exactly, but if you're holding a bucket of securities with 10% in default...when will you be told by the company that you have 90% of your debts paying in at 7% interest, and the others are no longer expected to pay. I could see a hypergowth company decide it would be better to absorb some losses upfront to make winners for everyone and keep growth going, but that kindof switching will get them in trouble if they're caught...and the party is over when the fat lady runs out of cash....unless they can sell more shares.
Not sure on specifics, but if it's too good to be true would be the phrase I'd go with here.
My concern is any economic slowdown then expect higher default rates...as the market is suggesting a slowdown occurring then LC's stock price lower in anticipation of losses
All new companies with new forms of economic models are "over-valued." Even FB and AMZN are overvalued by traditional metrics. The question is not why LC is overvalued but why it is downtrending the way it is especially after each Compass Point's announcement.
Downtrends occur because you have people buying thinking it's going to turn around, but it doesn't, so they sell to the next gambler and so on and so on.
My concern is any economic slowdown then expect higher default rates...as the market is suggesting a slowdown occurring then LC's stock price lower in anticipation of losses
I haven't looked into the stock, but I do like the service it provides. I own about 150 loans on LC. So far I have a 14.8% APR so I am quite pleased. I agree that the default rate will probably go up in the event of an economic downturn, but so stocks probably will crash as well so what can you do.
I like having the diversity of something other than my bond, equity, commodity, and RE holdings, but the downside is the loans are very illiquid and I haven't taken the time to see how robust the secondary market is if I want to sell them.
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