[ADiamond]

http://www.forbes.com/sites/petercoh...ingclub-stock/

Just as we saw during the 1995 to 2000 Internet bubble, venture capital investors are assigning very high value to companies with very rapid growth in huge markets. In so doing, they disregard traditional financial measure like revenues and profits.

Such bubbles have predictable shapes — following five phases:

I. Pioneer. This is the stage when the biggest risk-taking entrepreneurs and the occasional angel investors are willing to invest in a startup — usually right after the last bubble burst and everyone else thinks they’re crazy.
II. Glimmer of hope. Here a leading player in the new market segment is bought or goes public – and that makes peer companies believe that they and their investors may also be able to exit at a profit;
III. Harvest. This is where the followers in that market feel intense pressure to grow fast or sell out to capture what they fear is the final opportunity to cash out;
IV. Enter the tourists. Here is when people from traditional lines of work like investment banking and consulting decide to leave their comfortable perches to get their share of the boom; and
V. Collapse. Finally, something happens to spook everyone — all of whom scramble to get their money out. If the boom is financed through equity, the ripple effects are more limited than if it has been backed by borrowing.
At the moment, we are at different phases for different industries. But we may be at a blend of Phase II and Phase IV for the peer-to-peer lending market in which LendingClub started competing in 2007. It operates a “platform” — meaning a website that people can access via a variety of devices — to connect people who want to borrow money with others who want to lend it to them.

"they disregard traditional financial measure like revenues and profits"

[MCNetwork]

Irrelevant. 74% of the companies that went public over the past 6 months weren't profitable.

[Zach]

Didn't you watch Breaking Bad?

First, corner the market.... Then raise your prices!

Soon, On Deck be doing 1.4 factors for 3 month turns, up to 4th position.

[MatthewAStucchio]

Didn't you watch Breaking Bad?

First, corner the market.... Then raise your prices!

Soon, On Deck be doing 1.4 factors for 3 month turns, up to 4th position.

Couldn't agree with this more. Either that or they will have a tougher road to profitability than they already have. Longer terms at lower factors, unsecured, to me is not the answer. Whatever each lender's definition of defaults is, it is still high and I don't care what anyone tells me on top of overhead as well. Just my opinion.

[Andy]

Didn't you watch Breaking Bad?

First, corner the market.... Then raise your prices!

Soon, On Deck be doing 1.4 factors for 3 month turns, up to 4th position.

haha nice one. but not toooo far of a stretch, they are now doing 9 month 1.38s on some files, not such a great rate anymore. But they are capping rates at 99%apr, want to stay under 100% for PR purposes. And anyone that has been with them long time im sure has noticed their rates have trended upwards the past few years. I can remember funding 12 month 1.20 with them and making 8 points, ahh those were the days...

[Chambo]

Couldn't agree with this more. Either that or they will have a tougher road to profitability than they already have. Longer terms at lower factors, unsecured, to me is not the answer. Whatever each lender's definition of defaults is, it is still high and I don't care what anyone tells me on top of overhead as well. Just my opinion.

As soon as the shareholders start seeing the actual 10Q's and audited (not some back room shenanigans) financials, they'll start making demands that ODC will have no choice but to cover.

As and far as the companies that went public without profits....how many of them are still around a year, two years later?

We in cash advance might only think 3-6 months ahead, but big money investors are looking years into the future.

[Zach]

All jokes aside, On Deck is probably in the best position of any lender right now. Think about it... If you take renewals out of the equation, they are originating the most deals in the market right now. It doesn't matter if they are doing it at 0% APR, as long as they have sufficient backing. If this continues, their portfolio will overtake CAN Capital's within the next 2 years (as far as gross funded volume).

If they do any of these four things, they will be set:

1. Sell their platform to a large bank for a several billion
2. Raise their rates (or at least have high-risk categories that have substantially higher rates)
3. Lower defaults
4. Lower overhead

I would personally go for #1.

[Chambo]

All jokes aside, On Deck is probably in the best position of any lender right now. Think about it... If you take renewals out of the equation, they are originating the most deals in the market right now. It doesn't matter if they are doing it at 0% APR, as long as they have sufficient backing. If this continues, their portfolio will overtake CAN Capital's within the next 2 years (as far as gross funded volume).

If they do any of these four things, they will be set:

1. Sell their platform to a large bank for a several billion
2. Raise their rates (or at least have high-risk categories that have substantially higher rates)
3. Lower defaults
4. Lower overhead

I would personally go for #1.

you are really daydreaming, aren't you? Commercial banks cannot legally get involved directly in cash advance.

God, you sound like Sharif three years ago...."Bank of America is going to buy us for a BILLION DOLLARS!"

[CO1]

Where is Can Capital? Weren't they working to go public too. . . Or did they just do that so Ondeck can get to the punch an learn from Ondeck an to stay private still or did they do that to get Ondeck out of the picture completely. . . Hmm.

[Guy In The Know]

As soon as the shareholders start seeing the actual 10Q's and audited (not some back room shenanigans) financials, they'll start making demands that ODC will have no choice but to cover.

As and far as the companies that went public without profits....how many of them are still around a year, two years later?

We in cash advance might only think 3-6 months ahead, but big money investors are looking years into the future.

did you graduate from college?

[Zach]

you are really daydreaming, aren't you? Commercial banks cannot legally get involved directly in cash advance.

God, you sound like Sharif three years ago...."Bank of America is going to buy us for a BILLION DOLLARS!"

Chambo, couple of things:

1. On Deck does not do cash advances. They do business loans.

2. If On Deck sold their platform to a bank, they could limit the APR to a specified percentage that would be legal (although many states do not have usury laws for business loans), or they could even just utilize the technology and data to automate their underwriting.

3. Why wouldn't a bank purchase On Deck? It would automate the processes of a huge, untapped market for bank space. The reason they don't do small business loans anymore is because the cost of underwriting does not make sense for the minimal profits. An automated system using the On Deck scoring mechanism would alleviate their manpower costs, and the higher rates would increase yield.

No reason for a personal attack here buddy, just expressing what I think their strategy is. Do you think they are doing poorly? If so, why?

[CreditGuy]

Commercial banks cannot legally get involved directly in cash advance.

OnDeck isn't selling a cash advance. Its a loan. That's a distinction they have always made in the market.

Also, what legal mechanism is preventing banks from entering? Banks factor receivables all the time. Using the definition bandied about here that it is "a sale of future receivables", that is in essence a factoring relationship. The difference is that the bank underwrites existing A/R for quality and aging, sometimes employing a lockbox to ensure collection, but sometimes not; whereas an MCA is more about assessing the borrowers to consistently generate receivables and lending into that risk.

[ADiamond]

http://www.sec.gov/Archives/edgar/da...tm#rom772825_2

there is there investment prospectus available to only ipo owners up to a couple days ago which i doubt anyone looked at

balance sheet shows a net loss of 14MM-24MM for the past four years

any solid equity investor wouldn't touch this garbage.

[Guy In The Know]

http://www.sec.gov/Archives/edgar/da...tm#rom772825_2

there is there investment prospectus available to only ipo owners up to a couple days ago which i doubt anyone looked at

balance sheet shows a net loss of 14MM-24MM for the past four years

any solid equity investor wouldn't touch this garbage.

good call...yes, i doubt anyone read the prospectus

(good lord this board is scary)

[aredmond]

I would have to agree with Chambo. I don't think that the banks could get around the Usury laws that most states have in effect against high interest business "loans". Hence why the "advance" was created, legal jargon to slip one past the goalie.

[channin19]

Banks have been looking to lighten their balance sheets to get around capital reserve requirement from Basel and Dodd Frank. That's why these non-banking entities have been able to gain traction.

[Sean Cash]

I would have to agree with Chambo. I don't think that the banks could get around the Usury laws that most states have in effect against high interest business "loans". Hence why the "advance" was created, legal jargon to slip one past the goalie.

Banks already get around usury laws. How do you think they issue credit cards with rates higher than state usury caps?

[Chambo]

http://www.sec.gov/Archives/edgar/da...tm#rom772825_2

there is there investment prospectus available to only ipo owners up to a couple days ago which i doubt anyone looked at

balance sheet shows a net loss of 14MM-24MM for the past four years

any solid equity investor wouldn't touch this garbage.

I saw the prospectus a month or two ago,....Sean and I have been discussing it offline. Not that I didn't know half of this already

[Chambo]

Banks already get around usury laws. How do you think they issue credit cards with rates higher than state usury caps?

After 2008 and all the political fallout, there is NO WAY IN HELL they would even entertain entering into this realm.

Not to mention, it would ignite zealous lawyers (not just in Cali) to start suing for usury. The judge stated in the ruling in Cali "You can put a dress on a pig and it is still a pig" to combat the "it's not a loan" verbiage. You think if a National Bank got actively involved there wouldn't be lawsuits popping up all over the country? They would be massively salivating at the deep pockets.

[Chambo]

Banks already get around usury laws. How do you think they issue credit cards with rates higher than state usury caps?

And Sean, to go back to one of our many offline conversations...what has been happening to the credit card industry over the last couple of years? Didn't the Gov't step in and start imposing certain restrictions? You want that to happen to cash advance as well?

[Sean Cash]

And Sean, to go back to one of our many offline conversations...what has been happening to the credit card industry over the last couple of years? Didn't the Gov't step in and start imposing certain restrictions? You want that to happen to cash advance as well?

This would be a good time to read the American Banker article that came out yesterday. Only paid subscribers have access to it so I don't want to just copy and paste the whole thing.

American Banker: Why Lending Club Relies on a Bank You've Never Heard Of

"Lending Club's ability to make loans to consumers across the country hinges on a well-known 1978 Supreme Court case involving Marquette National Bank of Minneapolis. The Marquette decision allowed banks to export their home-state interest rates across the country, which enabled the creation of the nationwide credit-card industry.

The court ruling also gave rise to contracts between banks and non-bank firms that wanted to take advantage of banks' unique ability to apply their home state's rules elsewhere. One well-established example is the private-label credit card industry, where large retailers such as Walmart and Macy's partner with banks."

The article goes on to make the point that all of alternative lending can be disrupted by taking out WebBank and Cross River Bank.

In short, Lending Club, Prosper, Kabbage, PayPal etc, CAN Capital, Avant Credit, are all dependent on the success and non-interruption of WebBank. I wrote a little bit about WebBank here: http://debanked.com/2014/12/blue-hor...s-holdings-lp/

Surprisingly, it's completely illiquid. Some days it has no volume whatsoever.

Today's alternative lenders are using the same model as credit card issuers.

Merchant Cash Advance companies where future sales are purchased is a completely different model.

[kellyw]

Just came across this thread and looks like Zach was heading in the right direction considering JPMorgan Chase announced in December 2015 they will be doing their small business loans through On Deck beginning sometime this year.

Chambo, you must have been surprised when this was announced considering just one year prior you said, "After 2008 and all the political fallout, there is NO WAY IN HELL they would even entertain entering into this realm."

[Karen37a]

On deck shares are plummeting.

Lending clubs Ceo just stepped down for not disclosing pertinent information about his investment in a fund he then recommended and also over exaggerating the status or risk of the packaged loans, some say that they found outright falsifications and turned a blind eye to it.

These things will make it near impossible for certain companies that just registered to go public to do so...unless they have a few firms they know.

My stockbroker friends are not touching them with a 10 foot pole.

Amazing they got around the non disclose with Finra. When I opened my small LLC 2 of my partners who are in Finance/stockbrokers had to jump thru hoops, alert their firms, finra etc just for me to make them a mbr with a 9 % minority interest.

How on earth do you think you are going to sell packaged loans, that don't comply,change the ratings then buy them back.

Didn't you watch the Big short?

Again, it makes it hard to sell these ideas to the new batch of investors, if there are any...then again maybe it will make for a deep deep discounted buying opportunity when no one dives in

Warren Buffet said “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

[Karen37a]

Chambo was actually right , with their stocks being down 87% and a combined market value loss of 1.3 billion ( between lenders club and ondeck )

[FUNd]

So what you are saying is, Chambo knows?