Two Years Post-IPO, Rocky Journey For OnDeck

Two years out, it’s been quite the journey for OnDeck.

Back in December 2014, the online lender took to the public markets, raising $200 million, and soon out of the gate the shares were fetching $23, before crashing, like other firms in the space, to busted IPO status.  The slide since June 2015 has been almost a straight line down, with shares reaching a recent nadir of $3.64 and now trading for about $4.30.

One key for that leg down came in May of this year, when the firm reported a net loss that exceeded expectations and shares dropped by almost a third. The most troubling stat came as the firm sold only a quarter of its loans to investors, where once that tally had been a healthier 40 percent, and gains on sales shrank, too. With fewer loans sold into the marketplace, more loans are kept on the books, which means more risk is kept on those books, and less net income, too. Oh, and of course, the firm got some fallout from the headlines swirling around LendingClub.

Some things have changed a bit since then for OnDeck, though it’s safe to say that the story remains a show-me one for investors, skeptical as they are of online lenders in general.

Looking at the numbers as a trend, the latest quarter (third) showed total loans under management at $1.1 billion, which stands in stark contrast to the $781 million reported for the same quarter last year. The mix shift is different, though, as 79 percent of loans were held on balance sheet at the end of the latest quarter, versus 65 percent last year. Charge-off ratios have remained rather steady as a percentage of the cumulative book, so that is somewhat encouraging. And in addition, the recent boost to interest rates via the Fed may help boost returns on loans going forward.

But perhaps the biggest boon has been the $200 million the company just secured via Swiss bank Credit Suisse, via revolving-debt pact. The money will go toward boosting a model where the firm will rely less on outside investors and more toward funding the loans via the company itself.

The access to working capital gives the company a bit of runway to keep lending and worry less about outside investor demand. That may prove quite important in an era where bank deregulation may spur traditional lenders to make inroads online. Alternative lending may find some fuel in the form of small business demand tied to Trump administration tax cuts and less regulation.