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Why Lending Club Skyrocketed 18% Higher Today

By Eric Volkman - Mar 12, 2021 at 5:49PM

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One of the world's top investors enthusiastically plowed into the company.

What happened

Lending Club (LC 7.75%) was touched by hot stock market hand Cathie Wood on Friday. As a result, its shares were on fire throughout the day, ultimately closing 18% higher.

So what

Wood's ARK Fintech Innovation (ARKF 12.39%) exchange-traded fund (ETF) snapped up roughly 228,500 shares of Lending Club the previous day.

Lending Club is a value stock play at the moment. The company, which operates a peer-to-peer loan platform, has been trying to pivot its business since a scandal involving top management's falsifying of documents broke in 2016.

A young man giving a thumbs up sign stands beside a young woman holding a fan of cash.

Image source: Getty Images.

Since then, the company has focused more on prime lenders than previously and on the funding side, has drafted more reliable institutional lenders (banks, insurance companies, etc.). The strategy seems to be working, with a notable 37% rise in loan originations from 2017 to 2019.

As with many other finance-sector companies, Lending Club has struggled in the face of the economy-withering coronavirus pandemic. That said, in its recently reported fourth quarter, its originations were well above those of the preceding quarter; net revenue was up slightly; and net loss narrowed (albeit marginally).

Now what

Meanwhile, Lending Club turned a new page in February by acquiring e-lender Radius Bank. This effectively gives it an in-house banking arm, which at a stroke should save money because of synergies. It will also give it a cheap funding source -- the bank's deposits.

So at the end of the day, this looks like a clever and opportunistic buy from famous stock picker Wood.

 

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Stocks Mentioned

LendingClub Corporation Stock Quote
LendingClub Corporation
LC
$14.18 (7.75%) $1.02
ARK ETF Trust - ARK Fintech Innovation ETF Stock Quote
ARK ETF Trust - ARK Fintech Innovation ETF
ARKF
$18.51 (12.39%) $2.04

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