Lending Club (NYSE:LC) was the world's second largest IPO of 2014. An opening share price of $23.43, exceeding all expectations (as offering price was $15), netted the company its place in IPO history, and a market cap of over $6bn.
Since its float, there has been a continuous hype over it. Together with a genuine public response to what could appear as a reasonable and sustainable business model, you could find many cases of positive media coverage, and several blantant "buy" recommendations, which resulted in a steep incline.
In a matter of 30 days, a $29.29 per-share high was reached, surpassing opening price by 25%, after opening price surpassed offering price by 65%. That share price translated to a whooping $10bn market cap, for a rather revolutonary company, practicing a business model that has not proved itself just yet.
Then, a reverse trend has begun.
A column from Peter Cohan describes his concerns in regards to the company. He describes a "bubble" situation, in which VC's invest unproportional amounts into new ideas and a rapid growth, driving up prices for the public, which can result in a general spook once the very first thing goes wrong. The company was losing money, and shares were valued at $43 for every single dollar they make in annual revenues (in comparison with Facebook (NASDAQ:FB), making just above $17 for every dollar earned).
There were many others sharing these concerns, and even though LendingClub met its goals and milestones for 2014 (which is not difficult considering the IPO took place in Dec 2014, and forecasts were adjusted to real-time-data), the stock price started swirling around January 2015, and took a dive ever since, reaching an all-time-low today with just above $13 per share.
What's next?
In terms of business, things seem to be heading the right way. There were over 20% more loans, and similar growth in money borrwed via the platform in Q1 2015 in comparison to Q4 2014. Operating revenue growth of over 100% compared with 2014, and also a 500%+ growth in EBIDTA compared to this period.
Lending Club's type of financial service thrives during times of financial volatility. Their investors are making 7.9% per annum on average, and their borrower database continues expanding. Technology always wins over archaic and bureaucratic financial institutions, and the share price is adequate for investments.