Yesterday was an incredible day for the peer to peer lending industry as LendingClub went public. It surely has brought attention to a new way of investing that I have been involved with for a year and a half. There has been a substantial increase in articles about LendingClub which will only expand the investor and borrower base. The most exciting article for me is below, where I was mentioned in the Wall Street Journal:
In this post, I’ll outline how I handled the shares of LendingClub stock I was allocated. Please feel free to share how you fared in the comments.
As you may know, I documented the entire process of investing in the IPO in this post. On the morning of December 11th, I checked my Fidelity account to find that I had received 250 shares of the 350 I had expressed interest in. I’m grateful that LendingClub allocated shares to us retail investors since they could have easily done the opposite. In this article, Renaud expresses his gratitude:
We wanted to thank our customers. We’re being true to our mission of giving access to retail investors.
Readers that know about me know that I avoid purchasing individual stocks. I made an exception for the IPO given the unique opportunity. Although, I don’t claim to be an expert in analysis of companies, I was feeling confident that the stock surely wouldn’t flop. After all, this is a trillion dollar market and LendingClub is at the forefront of the new movement that is peer to peer lending.
To start with, let’s look at how the stock performed through a day and a half of trading – keep in mind retail investors were offered shares at the IPO price of $15.
The stock started trading at well over $24/share and even popped to above $25. I would like to say that I had a strategy of my plan on what I would do in different situations, but I never could have anticipated what happened. As I read about many investors on the LendAcademy forum who sold immediately, I patiently waited to see where this stock would settle and came up with two options that I’d be able to live with:
- Wait until January 1st to make a decision to defer gains
- Sell a portion of my holdings immediately to recoup my investment and let the rest ride
Since I’m looking at investing in more real estate, I decided that having the cash now was an important factor for me – so I went with the second option. I waited for the stock to rebound a bit in the afternoon and sold 150 shares at $23.90. This almost makes up for the $3750 of the 250 shares I had originally invested. I plan leave the rest of my 100 shares alone for the foreseeable future. I’ll reevaluate after a year when selling won’t result in short term capital gains.
You can see now that at the time of writing this that the stock has fought back to over $24. At the end of the day, it’s important to make a decision that you can live with. I give a lot of credit to folks who can trade stocks profitably – even yesterday (although exciting) was stressful as I considered all of my options. This has confirmed my belief that index funds are a much better option for me.
So where do we go from here? LendingClub is sitting on a pile of cash and my guess would be more aquisitions and an expansion of product offerings. We recently saw that LendingClub is starting to offer super prime loans, which is probably only a start. There are many other opportunities for them to get involved in as well as other p2p lending companies that may be attractive for an acquisition.
I can’t help but smile when I see pictures recapping the IPO and I’m proud to be an investor and shareholder in LendingClub. I think the best is yet to come, not only with LendingClub, but also the rest of the peer to peer (or marketplace) lending industry.
Further reading: Peter Renton was able to be be on the floor of the NYSE, you can read his recap here