Lending Club IPO: Should You Bank on This Hot Stock?
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Seven years after the financial meltdown that the big banks helped cause, banks are still sticking it to us by paying virtually nothing on our savings, while charging 16 percent on average on credit card debt — all the while peppering us with sneaky "gotcha" fees and high ATM charges.

That’s how a lot of consumers see the financial services business, and it makes them mad. After all, didn't we just bail out the banks?

So, naturally, consumers and investors alike perk up when they hear about a company using technology to steamroll banks by connecting borrowers with lenders — offering better loan rates in the process.

Related: 18 Percent of Us Fear We’ll Never Be Out of Debt

"That's exactly what we do," Lending Club CEO Renaud Laplanche told me in an interview a year ago. Laplanche wasn't talking to the press in the blackout around his company’s initial public offering (IPO) today. But in the past year, the company he founded has only gotten better at stealing business from the banks that so many people love to hate.

"If there is a big sweet spot for disruption, it's financial services," says Tom Taulli, an IPO expert. "Everyone hates their bank and their credit card company, because they know they are getting ripped off."

This is one big reason why Lending Club revenue jumped 122 percent in the first nine months of the year to $143 million. Loans originated grew an impressive 117 percent to $3 billion. Looking ahead, there's room for much more growth at the world’s largest online lending marketplace, which helps explain why LendingClub stock spiked as much as 67 percent when it started trading Thursday after being priced at $15 a share, higher than $12 to $14 expected range.

Lending Club so far has only captured a small part of the U.S. loan business. Then there's the rest of the world. "They're at the right place at the right time," says Kathleen Smith, an analyst with Renaissance Capital, which specializes in IPO research and manages the Renaissance IPO exchange-traded fund (IPO).

Related: Peer-to-Peer Lending — Why Your Neighbor May Soon Be Your Bank

So, like other companies using online platforms to steamroll comfortable brick and mortar businesses — think LinkedIn (LNKD) in recruitment — Lending Club shares could do quite nicely post-IPO. Just be careful. Lending Club hasn't been tested in a weak economy. It's supporting growth by moving into riskier loans. And naturally, several competitors are circling. In short, just like bank stocks during the financial crisis, Lending Club might eventually swoon.

The Basics
Before we get to more detail on the possible pitfalls, let's take a closer look at what Lending Club does.