FinTech - Improved Regulatory Environment Is Bullish
Firms from LendingClub (LC) to OnDeck Capital (ONDK) to Square (SQ) and numerous private FinTechs could benefit from have more regulator certainty. The origination of loans by non-bank, tech firms has always operated in the gray area while a national bank charter could provide for more freedom not available in the current system requiring state-by-state permission. In a big surprise, the regulators offered far more than what was expected.
While the move would eliminate regulatory uncertainty for LendingClub, it wouldn't alter the funding uncertainty for the online lending platform that crushed the stock in May. The move though could open up new deposit sources for OnDeck Capital if the FDIC was to allow federally insured deposits that would reduce the cost of funding future small business loans.
Both stocks trade near the lows as the tech sector has struggled after the election of Trump, but this new regulatory environment could provide a boost to these online lending leaders. In fact, LendingClub already trades back near the lows prior to a blowout Q3 report.
The stock is an extreme steal back towards $5 where the EV sits at only $1.2 billion. An investor even has less risk now with the online lender in verified turnaround mode already.
Lending Club: Game Changer
OnDeck Capital: Worth The Risk
Disclosure: Long LC. Please review the disclaimer page for more details.