LendingClubbing Continues As Sell-Side Throws Up All Over Former Peer 2 Peer Darling

Until yesterday, Peer2Peer leader LendingClub was the darling of the sell-side industry, with 12 buys, 7 holds and just 2 sells.

And as is usual on Wall Street, what a different 1 day makes because just hours after a major internal scandal was revealed that saw the CEO getting kicked out, and potentially implicating none other than LC board member John Mack, this morning it has been a relentless barrage of negative notes from all those who until recently loved the stock.

Some examples, first from CRT which just cut LC to sell with a $5 price target…

… from Stifel, which cut the company from a Buy ($22 target), to Hold…

… and finally from William Blair, which just gave up on the company and suspended coverage.

However as CRT notes, the biggest risk to the company is not the internal scandal that was revealed yesterday, but something we have cautioned on since last year, namely that P2P lending is fast becoming the new “subprime” industry, in which lender rushed to hand out loans with little concern about the fundamentals. Well, those fundamentals are about to come back with a vengeance. To wit:

The primary risk facing this company is the robustness and growth potential of its funding base or market place model and the underlying performance of its installment loans. On a short-term basis, the shares will trade up and down on incremental news items tied to guidance, ongoing loan performance, and monthly fundings.

As a result, LendingClub just tumbled to fresh 52 weeks lows, trading just above $4/share.