Ailing Lending Club Shakes Up Shadow Banking Boardroom

Renaud Laplanche, Lending Club’s founder, chief executive and public face, resigned abruptly in mid-May. His resignation casts a pall over not only the peer-to-peer lender that claims to be the world’s largest online marketplace connecting borrowers and investors, but also the shadow banking industry as a whole.

Shares in Lending Club fell 35% following a report that Laplanche had been ousted over lack of disclosure of some $22 million in loans sold to an institutional investor.

But the truth is that the decline in the value of Lending Club started much earlier and proves that disruptive finance can be a hard business. Placed at $15 per share in an initial public offering in 2014, Lending Club reached a $28 peak at the end of that year. Since then, it has declined steadily; the stock was trading at $3.50 a share in mid-May.

Lending Club was the biggest and by many measures one of the most successful companies in an industry once valued at $10 billion. But LC struggled increasingly to match borrowers’ and lenders’ demands in a transparent and immediate fashion.

Brad Lamensdorf, principal and co-manager of the short-only Ranger Equity Bear fund, with $250 million in assets, calls Lending Club’s woes the tip of the iceberg. He began shorting Lending Club when its shares were trading at around $22 at the beginning of 2015. “We started shorting for three reasons: They were trading at 23 times their sales, which is crazy; second, we were very skeptical of their business model; and there was a
lot of competition coming both from online and traditional lenders.”

Lamensdorf is also shorting OneMain Financial Holding, which provides unsecured and auto-secured personal loans.