Lending Club management reshuffle leads to job losses
Jobs will go as Lending Club reorganises its top brass and looks to rebuild investor confidence following the untimely resignation of former chairman and CEO Renaud Laplanche.
Laplanche resigned in May following an internal review of sales of $22 million in near-prime loans to a “single investor”, in contravention of the investor’s express instructions, according to Lending Club.
However, the Los Angeles Time says there were “problems with some investor disclosures” and “questionable loans” made to Laplanche and “his family members” (i.e. not a “single investor”).
At that time, shares in the US-based company fell by more than 20% as a result of the shock departure.
There are severe repercussions from Laplanche’s exit.
Lending Club says “in light of lower loan volumes in the second quarter” and “recognising that fully restoring investor confidence may take time”; it has “decided” to make 179 positions in the organisation redundant.
The firm says based on quarter to date originations, it expects loan originations in the second quarter of 2016 to be roughly one third lower than in the first quarter of 2016.
In an effort to “reignite” the platform, Lending Club provided several investor incentives (to both retail and institutional investors) most of which are expected to continue into the third quarter.
The company says it expects to transition away from these incentives in the fourth quarter and plans to resume revenue and EBITDA growth in the first half of 2017.
It has also named Scott Sanborn as its new CEO and president. Hans Morris, who had assumed the temporary role of executive chairman, has assumed the role of chairman of the board of directors.
“Scott and the management team have demonstrated they can lead Lending Club through this turbulent time,” says Morris. “The board has decided this is the right time to hand full responsibility over to Scott [Sanborn] in his role as the CEO.”
Sanborn adds: “We are working closely with investors to rebuild confidence and are encouraged to see them returning to the platform.”
Return of the Mack
There was more drama when John Mack, former Morgan Stanley chairman and CEO, encountered strong opposition from Lending Club shareholders during his re-election to the board due to his connections to Laplanche.
About 93 million (around 37%) of votes were against his re-appointment, according to a regulatory filing. Mary Meeker and Morris, the other directors up for re-election, were approved by wider margins.