USA TODAY International Edition
Lending Club names new CEO, cuts 179 jobs
Company says improper loans extended to former chief’s family
Lending Club named a new CEO in a bid to restore confidence in the troubled peer- topeer banking alternative under investigation for improper loan practices — activities it now says extended to the family of founder and former CEO Renaud Laplanche.
The San Francisco- based company also will cut 179 jobs. Shares, trampled in the wake of the company’s disclosure in early May it had sold $ 22 million in loans to an institutional investor that didn’t meet the buyer’s stated criteria, rose 7% to $ 4.60 Tuesday.
Scott Sanborn, who has been with Lending Club for six years, had most recently been acting CEO. He previously was Lending Club’s chief operations officer, and he helped steer the company toward its 2014 IPO.
His naming to the post Tuesday comes on the day of Lending Club’s annual shareholder meet- ing, which had been postponed from earlier in the month.
The company took that action after the Justice Department began an investigation into the improper loan sale.
Lending Club’s disclosure of that loan, which it said was sold to an investor even though staff knew it didn’t meet the investor’s request, led to the resignation of Laplanche. Tuesday, the company said its internal probe also found 32 loans, amounting to about $ 722,800, made in December 2009, issued to Laplanche and three family members made to help increase reported loan volume.
Founded in 2007, Lending Club has handled about $ 19 billion in loans via its online peerto- peer model, matching borrowers with loans financed by investors. It was the golden standard for a new breed of financial tech disruptors that aimed to overtake traditional financing mechanisms using elements of the sharing economy.
The company last month warned the probes might knock investor confidence, curtailing new business. Tuesday, it said lower loan volumes in the Aprilto- June time period led to the staff reductions, which amount to about 12% of its employees, the company says. It forecast second- quarter loan originations to be one- third lower than in the first quarter of the year.
Lending Club has made several changes to improve fund governance and is offering incentives to attract investors, it says.
BTIG Equity Research analyst Mark Palmer expects the stock, which has lost more than half of its value this year, to rebound. He reiterated a “buy” recommendation and $ 9 target price.