The head of the Lending Club has undermined investor confidence in a whole market segment

The rapid development of various market segments provides tremendous opportunities for the growth of new projects. But when difficulties arise in the market, an unprepared leadership without relevant skills begins to make mistakes - now the Lending Club, which deals with online lending, is on the list of similar companies. Since the public offering of shares in 2014, the company's shares have fallen significantly, while capitalization has decreased from $ 8 billion to $ 1.8 billion. But after the results of an internal investigation of the conscious sale of bad quality loans, the shares fell another 34% to $ 4.62 per share. As a result, the head of the Lending Club Renault Laplanche resigned from his post.

“This is bad news not only for the Lending Club, but also for the industry as a whole. Really bad, ” said Peter Renton, founder of the conference LendIt.

Now investors can begin to more closely examine the qualifications of the founders of new startups, and in general they will be more cautious about the online credit market. In the case of Lending Club, we are talking about a loan of $ 22 million, which did not meet the required credit rating of the buyer. Presumably, the buyer was an investment bank Jefferies, but later Lending Club bought out loans without any losses for the bank.
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As a result, after these actions, the Lending Club and such companies as Prosper and OnDeck Capital have difficulties in demonstrating the viability of their economic model to investors. After the unsatisfactory results of the Lending Club, investors from other similar companies begin to worry about their investments. Along with this, such services can now receive additional attention from regulatory authorities, which will likewise affect both direct investors of online lending services and their customers.

“Investors first shoot, and then ask questions,” Christopher Brendan, investment analyst at Stifel, comments on this.

Currently, the Lending Club remains the largest p2p online lending service selling loans to investors. But after such a scandal, trust from investors and banks was undermined, which would greatly complicate the process of leaving the Lending Club out of the crisis and only aggravate the situation.