There have been so many rumors flying around the last week or two about the IPO that I thought it must be imminent. And it turns out that some of the rumors have been true. While the price is not set yet we do know that the IPO is listed for $500 million. The investment banks leading the offering will be Morgan Stanley and Goldman Sachs.
As I write this the news is less than 60 minutes old but there has already been a flurry of articles published about the IPO. On Twitter I have have seen at least a dozen news stories mentioned already. I was interviewed a couple of weeks ago by Ari Levy of CNBC in preparation for their IPO and he published this article this morning. In it he said that his sources are telling him that Lending Club plans to go public before Thanksgiving.
In the New York Times, Michael De La Merced reports that at $500 million the Lending Club IPO will be one of the 10 biggest stock market debuts ever for an internet company. He also said that this $500 million number could well go higher. I will have a round up of the rest of the coverage in my regular Saturday morning news post this weekend.
So What Happens Now?
I have no experience in following a company as they go public so I asked my good friend and Lend Academy partner, Bo Brustkern, to give me his thoughts. He is a former venture capitalist and has been following IPOs for a long time. Here is an explanation of what is happening and what we can expect.
This is a $500 million fundraising event for Lending Club through an IPO (Initial Public Offering), of its Common Stock. Once the company has IPO’d, Lending Club’s Common Stock will be publicly available for purchase by individual retail investors, as traded on the NASDAQ or NYSE. The offering itself is being managed by the investment bank of Morgan Stanley (no surprise there), which appears “on the left” on the front page of the company’s prospectus. The primary co-manager is the investment bank of Goldman Sachs, with support from the investment banks of Stifel, BMO, William Blair and Wells Fargo Securities.
Now Lending Club will proceed into what is known as a quiet period, during which company management is forbidden by the SEC to promote the offering. The quiet period will last from now until up to 25 days after the stock begins trading publicly.
The company’s preliminary prospectus, which is colloquially known as a “red herring,” contains a description of the business, discussion of strategy, presentation of historical financial statements, explanation of recent financial results, management and their backgrounds, and ownership. It is subject to amendment. Lending Club senior management, bankers and attorneys will proceed with a sometimes lengthy Q&A process with the SEC during which the document is clarified, and at the end of which the offering can be made effective.
Lending Club management will later go on a road show, a grueling multi-week, multi-city, and often multi-continent series of in-person meetings with institutional investment managers during which time the company and its investment banking team will present the company to what they hope will be covetous long-term, buy-and-hold investors. At the end of this cycle – scrutiny by the SEC, conducting the road show, etc. – if the IPO window remains open, that is to say the economy shows strength and investors in first-issue securities (i.e., large institutions) are sufficiently interested in purchasing $500 million of Lending Club stock, then the company will execute its public offering. The moment we’ve all been waiting for will arrive. The offering price will be set by the company and its bankers immediately prior to the first trade.
So far, Lending Club management has declined to comment on whether or not there will be an allocation carved out for individual investors. This too is not a huge surprise. Investment bankers tend to hold sway in these discussions, since the inclusion of retail investors can complicate the IPO process. What’s more, allocation decisions are often made at the last minute before the IPO goes effective. We at Lend Academy have always been clear on this point: irrespective of the complications it entails, Lending Club is the kind of company – and Lending Club management are the kind of people – that can make a retail allocation work.
One final note. I haven’t forgotten about the little reader contest I announced back in June. The winners will be determined after Lending Club actually goes public.
Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.