-
Renaud Laplanche is a happy if somewhat tired man. The company he founded, Lending Club, exceeded most expectations by closing its first day of public trading at $23.43 after starting at $15. But challenges lie ahead for his company and others in the alternative lending space.
December 11 -
Whether the startup's pricey valuation makes sense depends on whether you view it primarily as a tech firm or a financial company. And the answer to that question has big implications for the broader financial services world.
December 10
Noah Breslow sounded like he was on his sixth cup of coffee when he called Wednesday to discuss the initial public offering of his online small business lending platform, OnDeck Capital.
Breslow, nearly breathless, called the IPO "amazing," and "watershed moment" for the industry when considered in conjunction with LendingClub's smash IPO last week.
The IPO exceeded expectations, pricing at $20 per share after underwriters set a target range of $16 to $18. The company's stock hit a high of $28 per share in its first full day of trading Wednesday a 40% increase before ending the session at $27.98 and dropping slightly lower in afterhours trading.
The jump in stock value meant that the company ended up valued around $1.8 billion.
Despite the influx of cash, and with it greater investor scrutiny, Breslow said he didn't anticipate OnDeck changing the way it operates to accommodate raised expectations. "We've been operating with the discipline of a public business," he said, citing simulated earnings calls and other public company-like activities as evidence. "We feel like we're ready after eight years" of operating, Breslow continued.
OnDeck plans to essentially continue to double down on small business lending, a sector online marketplace lenders and investors consider to have substantial growth potential, rather than seek to diversify into consumer, auto, or other types of lending. Breslow called OnDeck's in-house small business credit scoring system "our core competency," adding that he viewed it less as competition to the banking industry and more as a complement. OnDeck already partners with BBVA and Bank of Montreal Harris on loan origination. The company is in talks to partner with more banks, but wouldn't say which ones.
The end of the IPO quiet period was also OnDeck's first chance to formally respond to a less-than-flattering
When asked about the article, and the potential regulatory attention that could follow more stories like it, Breslow responded that the article "took a few very outlier examples and linked them to our IPO." The company is regulated in the same manner as an equipment leasing company, he said, suggesting a clampdown would be politically unpopular. "Both sides of the aisle want to see economic development."
Breslow also cited the results of a study that OnDeck commissioned Analysis Group, a consulting firm, to perform. The study concluded that OnDeck's first $1 billion in loans assisted $3.4 billion in "business activity" and aided the creation of 22,000 jobs.
But the number on investors' mind Wednesday was more likely OnDeck's year-over-year loan origination growth of 171% in the first three quarters of this year.
