Mike Cagney is one of those Silicon Valley entrepreneurs for whom humility is a foreign language.
Since raising around $1bn at a $3.8bn valuation for his online lending shop, SoFi — which stands for Social Finance — he has called his peers unambitious dorks for working with Wall Street and told America’s biggest banks to watch their backs, I’m coming for you.
All with one key message: SoFi is not a bank. It’s “happily not a bank”. In fact, it’s “better than a bank!”. Or even better still, it’s a way to “un-bank millennials”. One could say, SoFi’s ‘not a bank’ almost to the point that the word ‘bank’ itself becomes entirely meaningless. (The common view is a bank’s a platform which uses network effects to transfer risk from those can’t afford it to those who can.)
JPMorgan’s silver-headed fox and chief executive Jamie Dimon dropped a little nugget of market-moving news yesterday, telling a bunch of people at a Treasury Department conference that America’s biggest bank was planning a partnership with “one of these peer-to-peer, small-business lenders”.
There are two games in town when it comes to publicly-traded “peer-to-peer” lenders. One is OnDeck Capital, which is a small business lender. The other is Lending Club, which largely refinances credit card debt and only started doing business lending this year. Guess whose shares tanked almost 10 per cent yesterday and whose shares peaked up nearly 6 per cent after Dimon’s comments? Read more
Fans of buzzy peer finance and sourcing money from crowds should read a great piece in the FT about Crowdcube, an equity funding site, by Murad Ahmed.
We’ve looked at individual opportunities for crowds to lose money, but this considers more structural problems for small investors tempted to bet on tiny, risky companies in return for a precarious stake in a start-up.
All crowdfunding groups make it clear to investors that they are likely to lose money as the vast majority of start-ups will fail. But the UK’s Financial Conduct Authority recently rebuked the five-year-old industry, saying that many groups give a “misleading or unrealistically optimistic impression of the investment”.
Seven months have ticked by since hedge fund Marshall Wace spun out P2P Global, an investment trust focused on lending through peer-to-peer lending platforms. About £200m was raised at flotation and, by November, with about three quarters of those initial funds deployed, P2P said it was actively considering a fresh stock offer.
Two weeks ago it said it was issuing 10m “C” shares at £10 apiece. But demand from investors immediately topped 20m, so the issue has been increased to 25m shares — raising £250m. Read more
- Darling, 50 time revenues is what disruption goes for these days. Don’t tell me you got here in an actual taxi.
- Sure, WebBank could walk away in 2018 and anyway is a non-exclusive partner. Primary issuing banks are ten a penny; this is the new age of finance. Read more
One day we will cease to be amazed by the wonderful new world of crowdfunding, but that day has not yet arrived.
In the FT on Wednesday is a story about crowdfunding debt finance for, among others, a restaurant chain. More on that in a second, but let’s enjoy the quote from James Tomlins, a high-yield bond portfolio manager at M&G: Read more
Hey, how would you like to invest in US credit card debt, via the UK’s tax free regime of individual saving’s accounts? You can’t yet, but the hedge fund Marshall Wace and broker Liberum are aiming to raise £197m for a investment trust listed in London to do just that.
For possible catches, you might turn to the 96 page prospectus that dwells on the risks at hand. But the chief pause for thought might be that this will be an expensive way to lend money to consumers and small businesses, offset by the use of some leverage to juice the returns back up.
First though, a little background on those involved may help to understand how it works. Read more
The ratings agencies are wondering how to apply their business models to the growing world of P2P loans.
From Standard & Poor’s this week:
Standard & Poor’s believes the novelty of this sector and its wide range of players presents unique challenges in assessing the overall risks in future P2P loan securitizations. We monitor developments in this nascent sector from a cross-sector vantage point and draw upon our experience in rating various types of consumer, commercial, and structured debt.
P2P lending is evolving, and it’s still too early to know what the industry will look like in its more mature state. As with any young and untested market, we believe there are issues that need to be addressed before we can assign ratings. Some of these issues are P2P companies’ lack of performance histories through full economic cycles, uncertainty about their long-term commitment to the business, and their financial stability, operational risks, servicing quality, and loan credit performance in a downturn. We also consider the unproven ability and capacity to comply with new and ongoing regulatory and legislative requirements.
The UK Financial Conduct Authority has published its long awaited rules for crowdfunders and peer-to-peer lenders. You can read the full policy statement here, but lets cut straight to some frothy outrage from Barry James, founder of the Crowdfunding Center.
On a day like today one has to wonder whether our FCA is the worst regulator in the western world. The words that spring first to mind are inflexible, stubborn and unimaginative. Maybe it’s time for a change.
FT Alphaville tasted the future of financial innovation this week, or at least the parts of it pitching for business at the Finnovate conference in London’s Billingsgate market.
It had the buzzy feel of a corporate hospitality tent at a music festival — ties off, iPads out, lets do business in close proximity to what the kids are up to. In this case though the stage was given over to seven minute presentations for aps, websites and, er, innovation platforms. Read more
Meet Trustbuddy, the cutesy face of financial innovation, where peer-to-peer lending collides with payday loans.