Lending Club (LC) CEO Renaud Laplanche Resigns: Here's Why

Joel Anderson  |

Shares of Lending Club (LC) were tanking on Monday morning as the markets reacted to news that CEO Renaud Laplanche had resigned after the company reportedly mistakenly sold $22 million to a single investor despite those loans failing to meet that investors criteria for investment.

Lending Club Offers a Masterclass in PR

One way to ensure that nobody pays all that much attention to your earnings report is to use it to announce that your CEO is being forced to step down. Lending Club announced the departure this morning in the same press release that it used to announce its Q1 figures in. Those earnings showed that the company beat on revenue ($151.3 million against $148.2 million forecast) but missed on earnings.

"As our first quarter results demonstrate, Lending Club's business was strong despite the increasingly challenging investor environment," said Lending Club President and acting CEO Scott Sanborn. "I will work closely with our valued borrowers, investors, and business partners to drive the continued success of Lending Club, and I am excited to be leading this exemplary team."

Of course, precisely how the market would respond to the earnings is now open to endless speculation, as the present, more-than 25% cratering in the stock likely has a lot more to do with Laplanche’s sudden ouster.

Shady Lending and Failure to Disclose Important Details

The incident in question apparently involved $22 million in near-prime loans, $15 million in March and then another $7 million in April that failed to meet the investor’s criteria for a non-credit, non-pricing element. The board’s internal review not only found the loans, they also uncovered further deception. Not only were certain personnel apparently aware that the loans failed to meet the investor’s criteria prior to selling them, there was also a failure to fully disclose all the details of the case during the review process.

"A key principle of the Company is maintaining the highest levels of trust with borrowers, investors, regulators, stockholders and employees. While the financial impact of this $22 million in loan sales was minor, a violation of the Company's business practices along with a lack of full disclosure during the review was unacceptable to the board. Accordingly, the board took swift and decisive action, and authorized additional remedial steps to rectify these issues," said Hans Morris, director and now the holder of the newly-created position of Executive Chairman. "We have every confidence that Scott and the management team are well positioned to lead Lending Club forward."

The end result is that Laplanche is out and Scott Sanborn has taken over. Three other senior managers were apparently fired as a result of the incident.

A Cooling Market for P2P?

Since the company IPOed in late 2014, the market for P2P lending has been getting a lot less love from the market. After debuting with much fanfare, shares in Lending Club are now off nearly 80% from their Day 1 closing price. Lending Club’s primary rival Prosper, meanwhile, announced that it was laying off more than a quarter of its workforce and closing its Salt Lake City office.

On the whole, the big market reaction, despite an 87% year-over-year boost in revenue, could be a sign that the market has really soured on the industry.

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