Renaud Laplanche’s exit from Lending Club

by | May 11, 2016 | Investment News

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With thousands of SMEs seeking alternative sources of capital from Fintech businesses, how has the resignation of Lending Club’s CEO affected the marketplace?

Laplanche's exit from Lending Club

There are bound to be industry naysayers who will claim that the departure of Lending Club’s founder Renaud Laplanche spells the beginning of a tempestuous time for the industry.  But this incident appears to more closely resemble a storm in a teacup than the crisis that some were predicting.

The announcement of Laplanche’s resignation as CEO of the Lending Club on Monday 9th this week, appears to be a swift reaction to internal enquiries that appear to have found at least one person internal to Lending Club had an undisclosed economic interest in a loan portfolio.

This was following the investigation and apparent discovery of irregularities with approx $22 million in loans the company had sold to investment bank, Jeffries. Although the loans discrepancy was relatively minor, the Lending Club board considered the issue to be serious enough and bought back all of the loans.

You cannot fault their handling of the situation, though inevitably their stock dropped by 30% in the aftermath. In addition Goldman Sachs and Jeffries have stopped the purchase of further loans from Lending Club whilst they take stock of the events leading up to Laplanche’s departure.

But does this spell out the beginning of the end of online alternative finance?

Not at all! This is far from the unsettling times of the not so distant 2008 crisis, driven that time by traditional, well-regulated players and that didn’t bring down the Banks.

Lending Club are still going strong, and had it not been for the unfortunate events recently disclosed, we probably would have been shouting about the fact that this was the first quarter of positive Earnings Per Share (EPS) for the company.

Yes, the circumstances of Laplanche’s departure are unsettling, but if it turns out that this was more of an internal personnel issue as it appears to be, rather than a widespread marketplace lending issue, then there should be no marked effect on the industry.

There is still a need for alternative investment platforms such as Lending Club, Funding Circle and CrowdBnk that offer SMEs alternative routes to raise growth capital. And it’s a need that’s not being met by traditional banking.

There will be a period of unease whilst the dust settles, but inevitably finance platforms that offer investors transparency and solid risk-assessed investment opportunities will remain strong.

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