Rate Setter is a UK P2P lending organization, where lenders and the borrowers are matched anonymously based on the demand and supply for the loan products. Its matchmaking model is based on the life of the loan and the lenders desired rate of interest rate. Rate setter assesses the credit risk of the borrower and decides whether the loan should be approved or declined. Once the credit profile of a borrower is verified, the loan origination is done through Rate setter’s Trust account held in Barclays bank, where they disburse the amount to the customers. Rate setter acts as agent in issuing the loans. It also ensures that the lender’s money is protected and that investor undertakes a lower level of risk through the Provision Fund and sophisticated …show more content…
This gives an approximate enterprise value of $2.9 billion. This figure contrasts the $5 billion expected valuation that analysts forecast (Alloway and Massoudi, 2014). Lending Club had previously been valued at $3.8billion in April 2014 (Massoudi and Waters, 2014). It’s amazing to see the estimated value of a company almost double in last then a year. We feel our figure is justifiable because based on historical earnings from the past five years; Lending Club has been operating on a loss. In addition, a valuation in the order estimated by analysts would require an average growth rate well in excess of the 58% used in our estimates (based on five year historical data). We also believe that there is a risk that more competitors will enter the P2P market, and negatively impact LendingClub’s future revenue and potential. There could also be changes in regulation that could alter the whole process of P2P lending and its viability. Another factor to consider is what happens if Webbank can no longer originate Lending Clubs loans. All these factors compiled together have led us to conclude that Lending Club is not worth the $5 billion