The lending club has a pivoting Bitcoin suitor
Lending Club has all kinds of problems: a history of profit warnings, slight traces of scandal after a management shake-up almost two years ago, and a share price still over 80%. its top.
Add to that list: a bizarre, crypto-fueled activist campaign led by a Las Vegas-based payday lender called Paul Mathieson, who told authorities in his native Australia that he fled to America in 2008 because he was afraid of being killed by a gangster.
Mathieson’s case for the change at the Lending Club, set out in a letter to the company’s board of directors on January 2, is not terrible at first glance. He argues that the cost structure of the loss-making company, the pioneer of peer-to-peer lending, is “excessive,” noting a sophisticated head office in San Francisco and “hundreds” of “surplus” developers. He says the board should consider a hub for using its own balance sheet to lend, rather than acting as a broker, taking fees to match borrowers with lenders. Underwriting has been sloppy, he says, resulting in below-normal returns for investors.
Mathieson offers 13 shares in his own stock company, IEG Holdings, for each Lending Club share. At the time of the Monday morning offer, it was a premium of 19 cents, or about 5%.
But the Lending Club’s actions haven’t moved much and few people seem to be panicking, back at headquarters.
A reason? Mathieson’s past. In a quick response to its shareholders on Tuesday, Lending Club highlighted a history of questionable maneuvering, and said his company moved operations to the United States after receiving a ban on fundraising of Australian Securities Regulatory Authority.
the company noted that this was Mathieson’s second unsolicited takeover bid for Lending Club shares in the past six months, following an offer made last July and then withdrawn less than a month later . This time the optics don’t look much better. If the exchange were to succeed under the stated terms, IEG would have to issue approximately 269 million shares, or nearly 16 times its stock of common shares outstanding. The current holders of the IEG would then hold about 5 percent of the shares, and the shareholders of the Loan Club the rest. IEG would have sold, indeed, to the target.
Another reason why shareholders are turning down the offer is the technique Mathieson uses, known as a “mini-takeover bid”.“The CEO of IEG seems to be aiming for less than 5 percent because anything above that would lead to a host of (expensive) disclosures and hurdles to overcome.
The US Securities and Exchange Commission has long warned against such offers. Too many people are being pressured into clicking on a broker’s prompt, the regulator says. Some investors may not realize that they are selling holdings at a discount or receiving stocks – not cash – in return.
A final cause for suspicion could be Mathieson’s delay rotate to bitcoin, apparently to increase the value of his stock. On December 22, he announced that IEG, so far best known for its unsecured consumer loan business called “Mr Amazing Loans“, would create a new subsidiary to get into crypto.
The weakly traded shares of IEG nearly doubled the next day. He had retained about half of those gains by the time Mathieson evaluated his offer last Friday.
On Wednesday this week, the CEO announced plans to create a gold-backed digital currency. The stock nearly tripled on the day to $ 0.85.
The theoretical bonus now available to Lending Club shareholders? $ 6.87 per share, or about 164%.
Mathieson (right) declined to comment on the offer, citing SEC rules.
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