What happened

Shares of LendingClub Corporation (NYSE:LC) were sliding last month after the company, which connects borrowers and lenders online, posted a disappointing earnings report and revealed an investigation into its advertising and disclosure practices.

As a result, the stock finished August down 12%, according to data from S&P Global Market Intelligence.

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Image source: Getty Images.

You can see from the chart below that shares plunged in the second week of the month after the company's earnings report came out.

LC Chart

LC data by YCharts.

So what

Shares of LendingClub lost 10% on Aug. 8 after the second-quarter earnings report came out and the company disclosed the investigation against it. 

Top-line growth was solid as revenue increased 27% to $177 million on a 31% increase in originations to $2.8 billion. Revenue in the quarter easily beat estimates at $164 million, but investors were disappointed with the bottom-line results.

In the quarter, LendingClub took a goodwill impairment charge of $35.6 million in its patient and education finance unit, but excluding that, it reported earnings of $0.03 a share (or $14 million), a penny better than estimates. Still, investors seemed to focus on the GAAP loss of $60.9 million, or $0.14 per share. The company also expects a GAAP loss of $10 million to $15 million for the current quarter, and $109 million to $124 million for the full year, indicating that its problems extend beyond the goodwill impairment.   

At the same time, LendingClub also said the Massachusetts Attorney General began an investigation in June into its advertising and disclosure practices. It said the matter was in its early stages and it could not predict the outcome. 

Now what

LendingClub CEO Scott Sanborn said: "Our core business is firing on all cylinders. We are laser focused on the direct to consumer opportunity as we help our members on the path to financial success." 

However, investors remain skeptical of the business considering the ongoing GAAP losses and the pending investigation. Shares of LendingClub have plunged since the company's 2014 IPO, down 84%. Last month's news offers little reason to expect that trend to change.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.