LendingClub (LC), the first peer-to-peer lending company, made a shining debut on the New York Stock Exchange last week. It raised $870 million in its IPO at a starting price of $15, above its expected price range of $12–$14 (currently trading at $27.90).
LendingClub in Focus
LendingClub provides an online platform that connects borrowers with lenders of all types of loans from homes to vacations with lower interest rates. It has given more than $6 billion in loans in its seven years of existence, making it the largest peer-to-peer lending company. LendingClub has grown rapidly over the past few years with accelerating revenues of $10.98 million in 2011, $30.58 million in 2012, $85.8 million in 2013 and $133.8 million in the first nine months of 2014.
The stock soared as much as 67% on the first day of trading on December 11 and closed 56% higher despite the global turmoil and oil rout, and has grabbed investor interest. The shares of LC have been on the rise trend since its debut. The incredible success of the IPO paved way for expansion of the alternative online lending business in the broad tech world despite the number of issues including stiff competition from banks and startups, rising interest rates and regulatory hurdles (see: all the Technology ETFs here).
OnDeck Capital (ONDK) is the second peer-to-peer financing firm, which made its debut today on the New York Stock Exchange under the symbol “ONDK” in the fast-growing field of alternative lending via online platforms. It planned to raise $170 million by offering 10 million shares at $16–$18 and ended the day at $27.66. OnDeck will focus on providing small business loans in the range of $5,000–$250,000 with terms of three months to 24 months.
Based on LendingClub's successful market debut, several ETFs will add this stock in their portfolio in the coming days. Investors seeking to take advantage of the growing segment as well as participate in the booming alternative lending space could make a play with these ETFs in the months ahead.
Renaissance IPO ETF (IPO – ETF report)
This ETF will find LendingClub's entry into its roster at the close of the market on December 19. It follows the Renaissance IPO Index, which holds the largest and most liquid newly listed U.S. initial public offerings. Currently, the product holds 76 securities with the largest allocation going to Alibaba (BABA) and Zoetis (ZTS) at 11.2% and 10.2%, respectively. Other firms do not hold more than 6.83% of assets (read: Alibaba Investors Cheer Revenue Growth, ETFs to Benefit).
From a sector look, technology stocks make up for more than one-third share while health care and financials round off the top three with 16% exposure each. The fund has attracted $28.2 million in its asset base and sees light volume of 17,000 shares per day on average. Expense ratio came in at 0.60%. The product gained 2.7% in the year-to-date time frame.
ARK Innovation ETF (ARKK – ETF report)
This is an actively managed fund and seeks long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research relating to what ARK believes are genomic companies, industrial innovation companies or Web x.0 companies.
The fund will quickly add LendingClub to its portfolio. It currently holds 49 securities in its basket with none holding more than 4.26% of assets. Athenahealth (ATHN), Amazon (AMZN) and Tesla Motors (TSLA) are the top three holdings. From a sector look, technology dominates the fund's return with half of the portfolio while health care and consumer discretionary account for a double-digit allocation in the basket.
The product trades in paltry volume of under 3,000 shares and charges a higher annual fee of 0.95% due to its active management. It has amassed $4.8 million in its one and half month of debut and is down 7%.
ARK Web x.0 ETF (ARKW – ETF report)
This is also an actively managed fund focusing on companies that are expected to benefit from the shift of technology infrastructure from hardware and software to cloud. These companies will primarily be either developers or users in fields such as cloud computing, wearable technology, big data, cryptocurrencies, social media, services and data mining, and digital education (read: 2 Ark ETFs Hit the Market Targeting Innovative Companies).
Holding 38 stocks in its basket, the fund is pretty well spread out across various components as each holds less than a 5.8% share. The top three holdings are Athenahealth, Amazon and Facebook (FB). The fund will quickly add LendingClub to its portfolio. Here again, technology takes the top spot at 73%, followed by consumer discretionary (15%), health care (8%), industrials (2%) and financials (1%).
The ETF is just two-and-half months old in the technology space with AUM of $7.9 million and average daily volume of less than 4,000 shares. Expense ratio came in at 0.95%. The fund has lost about 3.5% since its introduction.
