Lending Club (LC) Stock Hammered After CEO Resigns
Shares of Lending Club Corporation (LC) were trading down -1.85 or -26.06 percent to $5.25 per share in Monday’s premarket after the company announced its first quarter results earlier this morning. In addition to earnings, the company announced the resignation of founder, Chairman and Chief Executive Officer Renaud Laplanche. Lending Club stock closed at $7.10 per share, up +0.25 or +3.65 percent in Friday’s regular trading session.
San Francisco, California based Lending Club Corp. was founded by Renaud Laplanche in 2006 and is the world’s largest peer to peer online lending platform.
Basically, a borrower fills out an online loan application at the company’s website. Following an evaluation by Lending Club, which has no impact on the borrower’s credit score, an interest rate is determined and the qualified borrower is then presented with a variety of loan offers. On the other side, investors — which include individuals and institutions — can select which loans they wish to invest in and earn a monthly return. Lending Club had its initial public offering on December 11th of 2014 at $15 per share.
In the company’s press release announcing earnings for its first quarter, Lending Club reported that the company’s board of directors had accepted the resignation of founder, Chairman and Chief Executive Officer Renaud Laplanche on May 6th. Renaud’s resignation was tendered after the internal review of sales of $22 million in near prime loans to a single investor. In addition to Laplanche, three other senior managers were let go.
The sale of the loans was in contravention of the investor’s instructions as to a non-pricing and non-credit element, which took place in March and April of this year. Lending Club repurchased the loans at par last month and resold the loans to another investor. The transaction had a minor financial impact on the company.
Director Hans Morris has now assumed the newly created position of Executive Chairman, while Scott Sanborn will continue to perform as President and become acting Chief Executive Officer. Morris noted in the press release that, “While the financial impact of this $22 million in loan sales was minor, a violation of the Company's business practices along with a lack of full disclosure during the review was unacceptable to the board. Accordingly, the board took swift and decisive action, and authorized additional remedial steps to rectify these issues. We have every confidence that Scott and the management team are well positioned to lead Lending Club forward.”
For the company’s first quarter of 2016, basic and diluted earnings per share came to $0.01 compared to a loss of -$0.02 per share in the same period one year ago. On an adjusted basis, earnings per share came to $0.05 per share versus $0.02 per share in 2015’s first quarter. Net income was $4.1 million for the quarter compared to a net loss of -$6.4 million in the same period last year.
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