Another wonderful article from Bloomberg about Lending Club. In sum, Lending Club did not screen duplicate loan applicants and the CEO cheated by artificially increasing loans. This was all caught by a curious guy sitting on a computer. Personally, I am embarrassed because I sifted through LC data and did not even cared about it. I made bunch of tables but did not really pay attention to the flaws of duplicate loans. I applaud the person who caught this duplicate loans by going through the data. Now the challenge is on, as a researcher, I will pay more attention to all data.
Now is LC broken? No, not really. It is doubtful that there are so many duplicate loans. Also, the majority of the problem seems to be fixed. Is LC going to do well in the future? I think so. Despite the rising competition, LC is quite established and refining its algorithms to make lending more efficient. I think a more likely scenario is a buyout from a tech company or bank to obtain its lending data, which can be quite valuable.
So should we invest in LC? Well, you can invest in the notes but LC’s stock, I would still hold. Hopefully, the increased marketing expenses pay off soon (100%!)