This week the P2P lending industry was validated with the success of Lending Club’s initial public offering. As the biggest P2P lending platform in the United States, Lending Club (NYSE: LC) raised $865.5 million from the sale of over 57 million shares at $15 each; surpassing its expected price range of $12-$14. The stock closed at $23.43 (+56.20%) on its opening day 12/11, placing the value of the company at $8.46 billion, well exceeding analysts’ expectations.
From 2009 to 2013, Lending Club’s annual operating revenue increased from $1.3 million to $98 million —demonstrating an impressive growth. This trend continued in 2014 as Lending Club’s reported operating revenue through September was already $143.9 million. Lending Club has helped finance more than $6 billion in loans since its inception in 2007. In 2013 Lending Club lent $3.2 billion almost doubling what they had loaned over the previous 7 years in its last full year; a major indicator of the acceptance of P2P lending.
“The Lending Club IPO demonstrates a paradigm shift in financial services and lending is in the making,” said Don Davis, managing partner of Prime Meridian Capital Management a hedge fund specializing in marketplace lending including peer-to-peer lending. “As borrowers become increasingly disgruntled with traditional financial services and millennials want alternative financing options lenders are looking outside the staid banking system to address their needs. The annual growth of loans made on peer-to-peer lending platforms like Lending Club and its successful IPO are a validation of the marketplace lending industry.”
The success of the Lending Club IPO sets the scene for potentially dozens of marketplace lending platforms to go public. OnDeck Capital, a specialist in small business lending, appears to be the next firm up and is scheduled to go public by the end of 2014. As marketplace lending firms go public, they increase the ability to create more awareness and expand the capabilities of their platforms which should continue to fuel the growth and serve the demand for these products by both borrowers and investors.
About Prime Meridian Capital Management
Prime Meridian Capital Management is an investment management firm specializing in P2P lending strategies. Its flagship Prime Meridian Income Fund is designed to provide investors low cost access to short-duration, high yield consumer loan portfolios by taking advantage of the efficiencies in the burgeoning P2P lending market. The Prime Meridian Small Business Lending Fund was developed specifically for investing in P2P collateralized small business loans backed by creditworthy personal guarantees. For more information contact Don Davis at 925-362-8510 or visit www.pmifunds.com. Prime Meridian Capital Management is an affiliate of Novus Investments, an alternative investment management firm.