We are heading into the end of the year, and this week we will see a spate of IPOs get pushed through the door.
On Wednesday night, LendingClub, the largest peer-to-peer lending service, is seeking to price 57.7 million shares at $12 to $14 a share, which is up from $10 to $12 just two days ago. Peer-to-peer lending has grown dramatically in the past few years as consumers and small-business owners are using it to bypass traditional lenders like banks.
Since LendingClub launched in 2007, it has facilitated more than $5 billion in loans, including more than $1 billion in the second quarter of 2014. That's growth. And it's turning profitable. LendingClub's competitors, of course, are banks, but in many cases they are hamstrung by regulations.
The flip side is equally interesting; investors use LendingClub to earn returns. I've seen considerable interest in investing in peer-to-peer lending platforms as an alternative to, say, high-yield investments.
The downside is that should the consumers whose loans you are investing in default, you have very little recourse. For personal loans, you do not have a claim on any assets, so you can get burned if the economy suddenly turns down.
Consumers like peer-to-peer lending because they can consolidate higher interest rate credit card debt. Investors like it because there is a wide range of investments and returns; it could be anywhere from 7 to 30 percent, depending on the risk profile. LendingClub gets a fee on the loan origination, and it sells off the loan.
This is the first of a number of peer-to-peer lending companies likely to go public. A second lender, On Deck Capital, is scheduled to price next week. But it makes mostly small-business loans and usually holds them.
On the Nasdaq Wednesday night, Momo, a Chinese mobile-based social networking platform, is seeking to price 16 million shares at $12.50 to $14.50. Alibaba owns a 20 percent stake. The problem is these Chinese social media plays have been crushed recently. Weibo is at a new low since going public in April, and Cheetah Mobile is down 16 percent this month.
There's more Thursday, but I'm a bit surprised there haven't been more deals. Maybe it's because the markets are trading off their highs and investors are more cautious.