Pantheon: Plenty of opportunities in fintech and P2P despite Lending Club’s woes

Alex Scott of private equity firm Pantheon International is undeterred from the opportunities in fintech and marketplace lending despite the setback seen in the past three months.  

Fintech in general and p2p and marketplace lending in particular are still throwing up attractive opportunities for equity investment despite the recent blow-up involving Lending Club, according to Pantheon’s Alex Scott, whose private equity fund is actively putting cash into the space.

Pantheon, through their £1bn UK-listed private equity investment trust Pantheon International PLC (PIP) is a big investor in fintech firms, albeit indirectly, as the portfolio is a fund of funds.  This includes holdings in Funding Circle, SoFi and Lending Club. While all three companies have seen staggering growth in recent years, the first two have remained in private ownership while Lending Club has gone public – in December 2014.

Performance of share price over 3 months

Source: Google

Since then the company’s share price have plummeted, most rapidly in May when co-founder and chief executive Renaud Laplanche was ousted over allegations of impropriety.

An internal inquiry had found Renaud Laplanche had doctored the date of origination of some loans that were due to be repackaged and sold on to an investment bank. Also, the firm found that Laplanche owned units in a fund that was buying Lending Club’s loans but this had not been flagged to Lending Club’s internal compliance team.

Lending Club’s share price plummeted in the wake of the scandal six weeks ago.  It fell more than 40 per cent in the week following Laplanche’s departure with the share price touching $3.5, although it has made some recovery in recent weeks and today has risen to $5.50.

Scott says there are some signs of challenges there, in the market lending market and the model is unproven in tougher times.

"That is part and parcel of investing in VC-backed companies. It is always a challenge when you have fast growing businesses that are taking market share from incumbents. It is inevitable that you are going to get a bit of friction there. Outside of fintech Uber is classic example.”

"With that rapid growth mistakes will happen at a local level but fundamentally the governance has got to be right around these business. it has going to have to flex and innovate and explore different sources of finance.”

He adds that in its favour, p2p and marketplace lending  is still relatively small, meaning it is still much more flexible to change than the incumbents it seeks to disrupt.

"If you compare the size the p2p lending market with what people have on their credit cards. It is infinitesimal. it is not a huge part of the global financial system. so it is an addressable issue, it is not like the mortgage lenders in the financial crisis for instance.”