Less than a month after its founder and chief executive was forced to resign, Lending Club on Tuesday announced a significant tightening of its lending standards and took the rare step of postponing its annual shareholder meeting.
The troubled San Francisco online lender also disclosed that a Scottish investment firm that had been its second-largest shareholder has sold its entire stake. Edinburgh's Baillie Gifford & Co. had owned 9% of Lending Club shares as of March 31 but now owns no Lending Club stock.
A pioneer in the so-called marketplace lending industry, the firm has been hit by both internal troubles and from broader forces that have stung the online lending business.
Early last month, Lending Club dismissed CEO Renaud Laplanche, the firm's founder, as chief executive following revelations that the company sold a batch of tainted loans to investment bank Jefferies. Laplanche also did not fully disclose a stake he held in a company that invested in Lending Club loans.
Concerns about the Jefferies loans — combined with broader worries about the quality of consumer loans issued by online lenders and a feared regulatory crackdown — pushed Lending Club last month to say it could have a harder time finding investors to buy its loans and might have to issue fewer loans as a result.
That's likely why Lending Club said Tuesday it will raise interest rates on nearly all new loans and will cut back on lending to borrowers who already are heavily indebted.
That move means the company will be making loans that should be more attractive to investors — safer loans that promise bigger interest payments — but fewer loans overall. In Tuesday's filing, the company said it expects to issue about 5% fewer loans because of the changes.
The company had been willing to make loans to borrowers whose monthly debt payments amounted to as much as 40% of their monthly income. Now, the maximum will be 35%.
Lending Club was supposed to conduct its shareholder meeting online, but the company in a last-minute regulatory filing postponed it until June 28.
"Given the developments of the last few weeks, the company is not yet in a position to provide its stockholders a complete report on the state of the company," Lending Club said in the filing. A spokeswoman declined to comment beyond the filing.
Shares of Lending Club ended the day down 7.4% to $4.39.
Shares have lost more than 70% of their value since Lending Club went public at $15 a share in December 2014.
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