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.
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 ZillowInc. 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.
Before the IPO started trading, it was greeted with a “buy”
recommendation from stock analyst Mark Palmer at brokerage firm BTIG. 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.
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. 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.
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