Published December 2nd, 2014:
TrustBuddy: Lending Club IPO price indicates large upside
P2P lending provider and peer to Sweden listed TrustBuddy, LendingClub Corp. has set a price range for its initial public offering that implies a valuation very similar to the one the company received in its most-recent private investment round.
The financial services company, which connects lenders and individual borrowers through an online platform, set a price range of $10 to $12 per share, as it plans to list on the New York Stock Exchange under the ticker symbol LC.
At $11 per share, which is the midpoint of the range, the company’s total stock outstanding after the IPO would be worth $3.98 billion. In LendingClub’s April Series F financing, investors valued the company at $3.8 billion.
The small difference in the planned IPO market capitalization and the latest private round speaks to a dynamic that has arisen recently in the venture market, where crossover funds have funded an unprecedented number of late-stage deals at valuations of above $1 billion. As of early October there were 49 privately held venture-backed companies valued at $1 billion or more, as VentureWire previously reported.
Some observers have said that such funds don’t view an IPO as a time to get their money back. Rather they view late-stage deals as a way of owning a significant portion of a company early on, without having to fight for an allocation in an IPO.
LendingClub’s largest shareholder right now is Norwest Venture Partners WFC, which holds a 16.3% stake. Norwest’s sole limited partner is Wells Fargo & Co. Other significant venture backers are Foundation Capital, with a 12.7% stake and Morgenthaler Ventures, with a 9.2% stake. Google had invested in the company via a secondary resale of stock in 2012, but it wasn’t mentioned in the IPO filing.
Lending Club had raised $225 million in equity funding as of Sept. 30 since its founding 2006.
Lending Club, which was founded in 2007, facilitated $6.2 billion in loans in 2014, up from $3.2 billion last year, according to the filing it made with the Securities and Exchange Commission.
Quarterly revenue increased at LendingClub during the year. The company reported net revenue of $56 million on $7.4 million net loss in the quarter ended Sept. 30. The revenue is higher than in the quarter ended March 31, just prior to the last investment round, when revenue was $38.7 million on net loss of $7.3 million. For the 12 months ended September 30, 2014 LendingClub booked $177 million in sales.
Lending Club will be the second P2P lending provider to be listed on a stock exchange. The pioneer has been Sweden listed TrustBuddy, which has recently announced two strategically important acquisitions. The acquisitions allow TrustBuddy to expand into SME loans (corporate loans) and long-term consumer credit. Furthermore, the acquisitions contribute to the further geographic expansion of TrustBuddy, which is growing all over Europe.
Investors intending to participate in the Lending Club IPO should seriously consider an investment in TrustBuddy as well, since the European counterpart is trading at significantly lower multiples. At a valuation of USD 4bn, Lending Club will be trading at 22,6x 12-months trailing revenues. Looking at the same timeframe, i.e. 12 months ended September 30, 2014, TrustBuddy reported revenues of SEK 106,4m. TrustBuddy’s current market cap is around SEK 400m. This implies a multiple of 3,8x. If we were to assign the same multiple to TrustBuddy as to Lending Club, TrustBuddy’s market cap should be SEK 2405m, or SEK 7,30 share. This would imply an upside of 5,8x compared to today’s levels.