LendingClub shares dive on investigation concerns

Shares in San Francisco-based LendingClub Corp plunged after the US Department of Justice opened a probe and the company raised a fresh spectre of funding concerns, reports say.

The peer-to-peer lender, which last week forced its founder out, said Monday that it may likely need to use a larger amount of its own capital to buy loans on its platform compared to prior periods.

LendingClub, whose shares were down about 10% today, matches people and businesses that need loans with those who want to provide them.

The company’s market capitalisation soared into the billions shortly after it went public in late 2014, but Wall St has subsequently cooled towards it.

Last week’s surprise departure of chairman and chief executive Renaud Laplanch has further dented investor confidence.

Laplanch’s exit followed an internal review that found LendingClub’s business practices were violated with the sale of $22m in loans, made to people with sketchy credit scores, to a single investor.

Further, Laplanch did not fully disclose his holding in the company.

On 9 May, after the internal review, the Justice Department delivered a grand jury subpoena, the company said.

The company added, in a report to the US Securities and Exchange Commission (SEC), that it had identified weaknesses in its financial reporting and said its disclosure controls and procedures were not effective.

LendingCLub said it was cooperating with the Justice Department and the SEC, it said.