LendingClub lays off 460 employees, or 30% of the workforce
LendingClub, the San Francisco-based company that provides online loans to help consumers refinance their credit card debt, lays off 460 employees, according to a regulatory filing. This represents 30% of its staff. CEO Scott Sanborn takes a 30% pay cut, while the rest of the management team takes a 25% cut. Employees earning $ 100,000 or less have not benefited from pay cuts, says Anuj Nayar, communications manager for LendingClub.
The move comes as the company expects a significant drop in revenue this year. Since LendingClub is not a bank (its acquisition of Radius has not yet closed), it finances loans in two ways: by matching investors directly with borrowers, or by using a line of credit from a bank, and then packaging and selling the loans to large investors. As the coronavirus has caused 22 million job losses in the United States, consumers are already in trouble to repay loans online. Investors have therefore become nervous about financing LendingClub loans – investors are in a “wait and see” period, says Nayar. As revenue forecasts decline rapidly, the business must reduce fixed costs such as employee salaries to meet annual expenses.
LendingClub was instrumental in the creation of online loans in 2006, making it faster and easier for people to obtain lump sum loans ranging from $ 1,000 to $ 40,000. It reached a market value of $ 10 billion after its IPO in 2014. But as the category has become more competitive, the cost of recruiting new clients has increased rapidly and LendingClub has not been able to hit a high. profitability. After the dismissal of CEO Renaud Laplanche in 2016 for allegedly selling $ 22 million lending to an investor in a way that violates specific investor instructions, its stock price collapsed and never recovered.
Over the past two months, LendingClub’s stock has fallen 40%, hovering around a market value of $ 500 million today. It is the largest personal loan lender in America, with approximately $ 12 billion in loans last year.
“It’s never easy to lose people who are not just colleagues, but teammates and friends,” CEO Scott Sanborn said in a statement. “However, there was a need to realign our workforce to the current business environment. Through these actions, we believe we are well positioned to achieve our long-term strategic goals and better serve our members.