For Immediate Release:

Wednesday, August 21, 2013

Lending Club is poised to have an IPO next year. I wondered, will owning stock in Lending Club be a good investment, particularly at the IPO? For this post, I’ll cover Financial Services IPOs in general, and in a future post I’ll look at the merits of a $1 B potential market cap for Lending Club.
Financial IPOs are hot
There have been more IPOs in the financial sector than any other industry in the last 12 months. Financial Services IPOs raised $11.5 B from 38 deals:

I was quite surprised, as I couldn’t recall any Financial Services IPOs recently. However, when I checked, there were some fairly big names. ING US was the largest IPO of any company in the 2nd quarter, raising $1.3 B on May 1st. EVERTEC (financial transaction processor in Latin America) was another big IPO in Q2, raising half a billion. (source)
However, Financial Services IPOs lag the market in total returns
However, Financial Services IPOs had the 2nd lowest total return of any industry. Over the last 12 months, Financial Services companies that IPO-ed returned just 5.1% to investors.

 
Recently, it appears as though the high-profile IPOs are delivering poor initial returns to investors (think Facebook, which is still treading at its IPO range more than a year later). The less sexy IPOs are the ones driving huge returns. One great example is Noodles & Company, a chain of fast casual restaurants throughout the US, with a high concentration in the Midwest. It leapt from a target price range of $15-$17 for its IPO to $36 on the first day and $42 today. Had you invested at the IPO, your return would have been +147%. However, had you even invested after the IPO at the market price, you still would have returned a healthy 15% in just 2 months.
So, when considering investing in a Lending Club IPO, proceed with caution. Not all high-profile IPOs have delivered for investors, and Financial Services IPOs in general have garnered a fairly cold reception.
Instead of investing in a Lending Club IPO and yield potentially 5%, why not invest on the platform itself for yields of 11%?* We can help you achieve your investing goals – sign up below for more information about how to get started investing in Peer-to-Peer Loans and how Peer Lending Advisors can help:
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