By Corrie Driebusch, Ianthe Jeanne Dugan and Telis Demos
Shares of Lending Club Corp surged 56% from their initial public
offering price Thursday--a strong debut for the first publicly
traded peer-to-peer lending company.
That first-day pop left Lending Club at a valuation more in line
with high-tech firms than the banks and other financial companies
it is seeking to displace.
On Wednesday, Lending Club sold 58 million shares for $15
apiece, above the $12 to $14 a share range that was outlined in a
filing with regulators.
Thursday morning, more than 100 employees, directors, investors
and other guests cheered on the floor of the New York Stock
Exchange as shares opened at $24.75. The stock quickly rose to a
high of $25.44 and later closed at $23.43.
In the crowd, all wearing matching red jackets, were founder and
Chief Executive Renaud Laplanche and Morgan Stanley's former chief
executive, John Mack, who is on Lending Club's board.
Lending Club connects borrowers with lenders in an online
marketplace for a fee; it doesn't actually lend any money itself.
The IPO has generated buzz particularly among technology investors,
according to money managers, even as the company faces a number of
risks, including competition from banks and other startups, rising
interest rates and regulatory hurdles.
The rise in Lending Club shares gave the company a market
capitalization of $8.5 billion.
At Thursday's closing share price, Lending Club trades at a
market value that is more than 50 times what underwriting bank
analysts project for its earnings in 2017, according to people
familiar with the deal.
That is in line with where smaller but rapidly growing Internet
companies, such as Zillow Inc. and Yelp Inc., trade, according to
FactSet. It is roughly double the valuation at which other firms
that facilitate financial transactions, such as Visa Inc. and
MasterCard Inc., currently trade.
A multiple akin to that of an Internet stock is "a reflection of
who we are and how we operate," said Mr. Laplanche, in an interview
Thursday. "We run an online marketplace, and you see the same
network effects you see on Amazon, Zillow, LinkedIn, Facebook,
Alibaba. The service we deliver is a financial product, but we
essentially operate as an online marketplace."
Before the IPO started trading, it was greeted with a "buy"
recommendation from stock analyst Mark Palmer at brokerage firm
BTIG.
Mr. Palmer said BTIG believes Lending Club "is poised to grow
rapidly by taking advantage of failure of traditional banks to meet
the credit needs of consumers and small businesses." Still, Mr.
Palmer put a $19 12-month price target on the stock.
At a breakfast that took place before Mr. Laplanche rang the
opening bell at the NYSE, Lending Club's guests at gathered in the
exchange's board room and listened to speeches by some board
members, including former Treasury Secretary Lawrence Summers.
Lending Club is among the biggest in a growing number of
peer-to-peer lenders, and its success has emboldened others in the
field.
Still, the company's future lies very much with Wall Street. For
one, in order to generate big volumes of new loans from borrowers,
Lending Club has plans to offer its own technology directly to
banks, including small community banks that need consumer loans to
fulfill regulatory quotas.
"We are partnering already with a number of banks and will
continue to do so in the future," Mr. Laplanche said. "It is very
hard for banks to lower their operating costs."
The highly anticipated deal raised $870 million for the company
before taking account of the overallotment option, which gives
underwriters the opportunity to sell additional shares under
certain circumstances.
The deal was led by Morgan Stanley, Goldman Sachs, Credit Suisse
and Citigroup.
Also making its U.S. stock-market debut Thursday was Momo Inc, a
location-based social network backed by Alibaba Group Holding Ltd.
The Chinese company's shares closed 26% above its IPO price at
$17.02.
Write to Corrie Driebusch at corrie.driebusch@wsj.com, Ianthe
Jeanne Dugan at ianthe.dugan@wsj.com and Telis Demos at
telis.demos@wsj.com
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