Fintech under fire: LendingClub and On Deck fall on earnings

Valuations in "fintech" are starting to look closer to fin than tech, as investors raise concerns over credit quality and whether demand for peer-to-peer loans can keep pace with supply. The poor performance of LendingClub (LC) and On Deck Capital (ONDK), in addition to the postponed IPOs of two other online lenders in the past six months, calls into question the IPO prospects of four VC-backed online lenders that have achieved $1+ billion valuations. Fintech take note.

                

Publicly-traded fintech plummets
LendingClub (LC), the largest online lending marketplace, fell 33% on Monday after releasing its first quarter earnings in which net income was down compared to the 4Q15, as well as announcing the resignation of founder and CEO Renaud Laplanche along with three senior managers. LendingClub raised $750 million in a December 2014 IPO at $15 per share; it jumped 56% on its first day and soon after closed at a high of nearly $28, but the company now trades 69% below its offer price, closing Monday at $4.66.

On Deck Capital (ONDK) which also went public in December 2014, plummeted last week after its earnings announcement also disclosed a large decline in net income from the prior quarter. On Deck went public at $20 and jumped 40% on its first day to reach an all-time high of $28, but the stock is now off 75% from its IPO price, closing Monday at $4.91.

Valuation pressure caused two online lenders to postpone IPOs
LoanDepot (LDI), an online mortgage and consumer loan provider, postponed its $510 million IPO in November 2015. Elevate Credit (ELVT), which focuses on online non-prime consumer lending, postponed its $76 million offering in January 2016.

How will five fintech unicorns fare?
At least four VC-backed online lenders have reportedly been valued at $1 billion or more privately. After recent trading in the space, IPO investors may not be so generous. These include student loan company Social Finance (SoFi), loan marketplace Prosper Marketplace, non-prime lender Avant and online small business lenders Kabbage and CAN Capital.