Prosper, the P2P lending marketplace, is reportedly closing down the secondary market for its loans later this month.
According to a report, which cited an email Prosper sent investors last week, the company will shut down the service on Oct. 27. The company doesn’t operate the secondary market itself but outsources to FOLIOfn, which is operated and maintained by FOLIOfn Investments, which is a registered broker dealer.
In the message to investors, which P2P-Banking obtained, it said: “We are writing to let you know that, as of Oct. 27, 2016, Prosper will no longer offer the Folio Investing Note Trader platform, the secondary market for Prosper Notes. Prosper has found over time that very few investors are using the secondary market and, as such, has made the decision to no longer offer this service. We apologize for any inconvenience that this causes. Prosper remains committed to its retail investor clients and to providing them a great experience.”
The email to investors went on to say that the secondary market trading service will be available as normal until the end of day Oct. 19. Following that time, any new orders to list Notes for sale will not have sufficient time to be completed and processed before the site becomes unavailable to users at the end of day on Oct. 27, 2016. Once the secondary market trading service is terminated, investors will not be able to sell Notes that they own and will need to hold them to maturity.
The move on the part of Prosper comes at a time when the company is exploring strategic options, having hired investment banks JPMorgan and Financial Technology Partners and having disclosed it is considering selling equity in the firm. Media reports said the privately held U.S. online lender is mulling the equity raise because, in part, the firm needs to tap markets to raise more money and strengthen balance sheet holdings. Specifically, the capital would improve funding sources. Equity sales could run the gamut between minority and majority stakes. As has been noted widely in the financial press, the industry itself has been buffeted by news that has been enough to make investors shy away from buying loans.