The company is based in San Francisco, but it’s in New York that the eyes are on it. LendingClub is a participatory finance company, founded in 2006. After it had successfully completed a Series A financing round of $10.26 billion, in August 2007, the company developed into a full-scale peer-to-peer lending company. LendingClub was the first peer-to-peer lending company to offer loan trading on a secondary market, over a standard period of three years.
Over the past fifteen years, the lender has become a reference in the United States, with a platform that brings together borrowers and investors, thus avoiding the need to become a real credit institution like banks.
However, at the New York Stock Exchanges, things are getting worse and worse. The largest lender to individual Americans is having a hard time weathering the current crisis. In recent months, the fintech company LendingClub was already suffering from increased competition.
LendingClub went public in 2014, at a time when its stock was trading at more than $90 and its capitalization was around $10 billion. Within a year, its share price was hit hard by the arrival of increasingly competitive competition, dropping its share price to less than $25.
Time passed, and LendingClub never regained its original glorious trajectory. The coronavirus pandemic could be a new dark period for the Californian company. In these new circumstances, a contingency plan has just been approved by its management.
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Drastic dismissal at LendingClub
460 employees were laid off from the company, according to a file published by the Securities and Exchange Commission (SEC), equivalent to 30% of LendingClub’s workforce. For the remainder, a 10 – 25% reduction in salaries was also decreed. The members of the management team will also experience a 25% reduction in their pay.
This emergency plan was decided at a time when the health and economic crisis triggered by the COVID-19 pandemic has had a major impact on the credit market. LendingClub expects a “significant drop” in its revenues this year. “While the coronavirus has caused 22 million job losses in the United States, consumers are already struggling to repay their loans online,” Forbes journalist Jeff Kauflin said.
A confident CEO in spite of everything
The shock was measured on the demand side of individuals, but also on the supply side of investors, rethinking the idea of financing loans in such an unstable period. LendingClub shares continue to plunge, trading as low as $6.45, the lowest since its introduction. A situation that does not alert its CEO Scott Sanborn, however, who believes in reducing fixed costs with the redundancy plan.
“It was necessary to realign our workforce with the current business environment. Through these actions, we believe we are well positioned to achieve our long-term strategic goals and better serve our members,” he said, regretting, however, the 460 displaced employees: “It’s never easy to lose people who are not just colleagues, but teammates and friends.”
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First published in PRESSE CITRON, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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