LendingClub Corp. (NYSE: LC), the first peer-to-peer lending site to go public, looked like a serious financial sector disruptor in December 2014 after its stock shot up 56% with its initial public offering (IPO).
Eight months later, I warned my readers about LendingClub's pitfalls in "Storm Clouds Are Gathering Around Peer-to-Peer Lending." And again, only two days after the one-year anniversary of LC's IPO, I released another piece inspired by LendingClub, "I Warned You about 'P2P Lending' – And I Was Right."
I hope you listened to me.
Not only has LC's stock collapsed, but the company's also reeling from regulatory hits, it just announced a lawsuit with the Federal Trade Commission, and it's facing a class-action lawsuit over lack of material disclosures that should have warned shareholders the stock was vulnerable to investigations.
Here's how tight the vice clenched around LendingClub really is…
The Numbers Don't Lie
LendingClub sure looked like a new-era disruptor to reckon with at the time of its IPO on Dec. 10, 2014.
While the first range suggested for the stock's coming-out party was $10 to $12, it got bumped up to $12 to $15 a day before its IPO. It was priced at $15 the night before breaking out onto the New York Stock Exchange and soared 56% that Thursday.
Coming out at the high end of its expected range and continuing to rocket upwards was even more impressive given the Dow Jones Industrials had sunk 200 points the day before.
The IPO raised $870 million for the company and gave it a capitalization of $8.5 billion.
But the IPO day's high watermark of $24.75 was about as close to the sun as LC would fly.
BREAKING: A New Dawn for Making Easy Money in America Has Arrived
Eight months later, when I warned about troubles in paradise, the stock was already down 36%, trading at just about $15. It was still hanging around that level when I warned about it again in December 2015.
Today (Tuesday, May 8), LC's stock is trading pennies above its all-time low of $2.57, down 89% from its opening day achievement, and down 82% from where I warned about the tough road ahead.
That sky-high market cap of more than $8.5 billion has dwindled down to just $1.12 billion.
Another Day, Another Scandal
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About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains.Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.
so what does that mean for people that have loans with lending club?
I was a "lender" on Lending Club. What a mess! I put up $30k with the promoted expectation of taking risks designed to get a 12% return. As year end approached I began to evaluate how taxes might be determined: not easily. I was expected to deal with each of many hundreds of small loans each as an individual investment and manage the taxes like a financial institution. The company was not helpful, and tax professionals were expensive, far more than justified by the income. so, I decide to try to liquidate everything, and tried to use the site's loan selling function selling loans at discounted value. Also not easy. By year end. there were still a handful of land not liquidated. and I requested the company take them over, which they eventually agreed to, reluctantly. As for the taxes, I decided I would simply report the whole investment as one investmentment, and the end result as the gain from the transaction (about 2%, but luckily no net loss, although there were individual loans that were bad, but not written off until collection fails!). I never heard anything from the IRS … yet.