Share in online lender OnDeck have dropped 20 percent on the announcement that growth this year will be slower than initially forecasted.
The top left OnDeck shares priced at a thrifty $7.05 – dropping to less than 50 percent of what it was when the firm first went public a little over a year ago.
OnDeck’s difficulties are not unique exactly – tech based financial services firms are seeing an ebb in the explosive growth that has characterized them for the last several years. On the other side of the table – in the investors who fund the loans are also becoming thinner as a different economy with greater uncertainty.
“They don’t do anything any differently than a financial institution,” said Bill Ryan, an analyst at Portales Partners, a research firm.
“These companies have been valued as if there’s really no credit risk or capital-markets risk whatsoever. I think that’s what changed.”
OnDeck says revenue will clock in at $320 million to $328 million in 2016, 3.5 percent t0 5.9 percent short of the $340 million analysts were predicting.
Apart from earnings – investors were also disappointed that OnDeck will not rake in significant revenue from it loan partnership with JMPC until 2017..
“We expect 2017 and 2018 to be years in which…revenues really begin scaling,” said Chief Financial Officer Howard Katzenberg.
“Deals are getting done,” but “at higher price levels,” Mr. Katzenberg further told analysts.
With the troubles that OnDeck (and LendingClub) have face – some of the 200 or so alt lending start-ups in the market are rethinking IPOs.
“Maybe the IPO route isn’t the best option for online lenders,” said Brendan Ross, president of Los Angeles-based Direct Lending Investments LLC, which buys small-business loans.