Alternative Finances

New Deal Could Cut Prosper Marketplace's Value By Two-Thirds

Once a unicorn, always a unicorn?

In Silicon Valley, maybe not so much these days — online P2P lender Prosper Marketplace is considering a financing round that could drop its value to somewhere around $550 million.  Not chump change, to be sure — but a far cry from the $1.9 billion valuation Prosper commanded as recently as 2015.

According to reports, Prosper may be looking to sell a roughly 10 percent stake in its business to a Chinese conglomerate — Linca — in a deal that will reportedly drop the marketplace's value by about 2/3.

The deal would see Linca invest $50 million in Prosper at a valuation of about $550 million.

Prosper raised about $165 million in a financing round in late 2015 led by Credit Suisse Group AG’s Next Investors. That round left Prosper with a valuation scraping $2 billion. Those funds were used to purchase the maker of a personal finance app for smartphones and accelerate the growth of its unsecured-consumer lending business.

But the marketplace shifted greatly between 2015 and today — as did the appetite for marketplace loans from money managers. Prosper has struggled to adjust to that situation — and revenue has taken a hit. In March, the company reported an annual loss for 2016 of $118.7 million, compared with a loss of $26 million for 2015.

Prosper’s newly minted CEO, David Kimball, took over the top spot in December, and profitability has been the goal. In February, Kimball agreed to sell $5 billion worth of Prosper’s loans to a consortium of investors over the next two years along with warrants to purchase shares representing 35 percent of the company. That deal — which includes player like Soros Fund Management LLC and investment bank Jefferies LLC — helped Prosper stabilize some.

The investment from Linca would be designed to provide Prosper with capital to fund future investments, according to Wall Street Journal reports.

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