The Lending Club IPO: A Fundamental Change in Funding

Yvan De Munck  |

A watershed moment it was indeed, that Lending Club ($LC) IPO.

Marketed with an initial $10-12 price range, upping the range to $12-14 during the roadshow, ultimately priced at $15, and up more than 40% on the first day of trading, now closing in on a $10 billion market cap. Book worthy. Picture perfect.

And right after, we had OnDeck Capital ($ONDK) going public as well in a successful offering - off to the races.

Many more are rushing their plans, still shooting for that window. SoFi, Prosper, Kabbage, and many others are or must be closely evaluating their options. Alternative and specialty finance in general, and online or marketplace lending in particular, is going into high gear, and I contend that "you ain't seen nothin' yet".

Let me put it this way: If Google Inc. ($GOOG) is starting to get nervous about their loss of "search" market share to Inc. ($AMZN), it continues to amaze me that so far, the banking world has really not woken up to the very real and existential threat they are facing with regards to their core business. You can say what you want, but more and more research is pointing to the inevitable move towards alternative funding solutions for both consumers and small businesses of the Millennial Generation

The Millennial Shift

These are the people that no longer need to know what a landline is to make a call - actually, they no longer call, they text/message. They don’t need a cab to catch a ride, they get an Uber. They don't need an office, as they go to a co-working space. And they definitely don't need a "classic" bank/branch, as they can use a Moven or Simple app for daily banking stuff, and to a myriad of platforms to get credit (for consumers, businesses, student, real estate sponsors, etc.). Same story for wealth management (don't get me started).

Anyway, you get the picture, and my take. This is not going away any time soon. This is just the start of something really big, really important, and really, really disruptive - to the core. In three years from now, there is no reason why Lending Club could not be valued at anywhere between $50B-$100B, at which point I can only hope they will not be snapped up by one of the Big Brothers. Needless to say, there are still big concerns on the regulatory side. If it is possible for a major bank CEO to make a call to lawmakers and have specific favorable language inserted into a major bill, than it's no stretch to think that similar things could happen to the marketplace lending industry if some feel the heat becoming too high for comfort. After all, some of them just need "a phone and a pen".

When we look back at December 11, 2014, we'll get to know the date as the moment where we separated the men from the boys. As for now, everything else in the industry will be benchmarked to this particular moment in time. It's not a  bad thing. It's not a good thing. It's just what it is. Alea iacta est.

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