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From: Glenn Petersen1/11/2021 6:08:09 PM
   of 196
Walmart launches fintech startup to build digital financial products for customers, employees

Julia La Roche
Yahoo Finance
Mon, January 11, 2021, 3:15 PM CST·1 min read

Walmart ( WMT), the world's largest retailer, announced on Monday that it is launching a financial technology (fintech) startup in partnership with Palo Alto, Calif.–based venture capital firm Ribbit Capital, a backer of Robinhood, Credit Karma and Affirm.

The new fintech company, which will be majority-owned by Walmart, aims to “develop and offer modern, innovative and affordable financial solutions” targeting Walmart's customers and employees.

"For years, millions of customers have put their trust in Walmart to not only save them money when they shop with us but help them manage their financial needs. And they've made it clear they want more from us in the financial services arena," Walmart U.S. CEO John Furner said in the release.

The board includes Furner, Walmart CFO Brett Biggs, and Ribbit Capital's founder and managing partner Meyer Malka. The startup, which has yet to be named, will add more board members and hire a management team. The new company expects to grow through acquisitions and partnerships.

“When we combine our deep knowledge of technology-driven financial businesses and our ability to move with speed with Walmart's mission and reach, we can create and deliver financial offerings that are second to none,” Malka said in a statement.

As the world's largest retailer, more than 265 million customers visit Walmart each week worldwide across its 11,500 stores in 27 countries and its e-commerce websites. In the U.S., Walmart has a fleet of nearly 5,000 stores, with 90% of the U.S. population living within 10 miles of a location.

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From: Glenn Petersen1/13/2021 3:51:30 PM
   of 196
A major fintech IPO:

Max Levchin’s Affirm pops nearly 100% after market debut

Jessica Bursztynsky @JBURSZ


-- Shares of Affirm, an online payments company, began trading on the Nasdaq.

-- Affirm priced its shares at $49 apiece, above its target range of $41 to $44 each.

-- The stock began trading at $90.90 per share.

Shares of payments company Affirm soared more than 103% in its initial public offering on the Nasdaq, kicking off what’s likely to be a busy season for market debuts.

The stock began trading at $90.90 per share. Affirm had priced its shares at $49 apiece, above its target range of $41 to $44 each.

Founded in 2013 by PayPal co-founder Max Levchin, Affirm has become prominent in the “buy now pay later” space that offers point-of-sale loans. The company allows customers to finance online purchases that can be paid back in monthly installments without accruing compounding interest.

It works with around 6,500 retailers, including Peloton, Wayfair, Walmart and direct-to-consumer eyeglasses company Warby Parker. In an update to its IPO filing, Affirm said it is used by more than 6.2 million people. Affirm also partnered with Shopify last year, allowing merchants to offer installment loans on products they sell.

Affirm brought in roughly $510 million in revenue for the fiscal year ended on June 30, a 93% jump from last year, according to its filings. In the three months ending Sept. 30, revenue grew 98% year over year, while net losses fell by roughly half to $15.3 million.

Affirm makes money when it helps a merchant make a sale. It also earns interest income on loans it buys from bank partners and some consumer loans. The rate it charges varies by consumers’ creditworthiness, but often starts at 0%.

“Our goal is to be a viable alternative to credit cards,” Levchin told CNBC ahead of the company’s first trade.

Morgan Stanley, Goldman Sachs and Allen & Co were the lead underwriters for the offering. Major investors include Peter Thiel’s Founders Fund, Khosla Ventures and Lightspeed Venture Funds.

Affirm’s market debut could mark another successful venture for Levchin, who owns 27.5 million shares in the online lender. Following PayPal’s sale to eBay in 2002, Levchin started the social application company Slide. That sold to Google in 2010 for a reported $182 million.

Affirm, which trades under the symbol AFRM, has made CNBC’s Disruptor 50 list twice.
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From: Glenn Petersen1/31/2021 6:45:28 AM
   of 196
The Silicon Valley Start-Up That Caused Wall Street Chaos

New York Times
January 30, 2021

The online trading app Robinhood became a cultural phenomenon and a Silicon Valley darling with a promise to wrest the stock market away from Wall Street’s traditional gatekeepers and “let the people trade” — making it as easy to put millions of dollars at risk as it is to summon an Uber.

This past week, in the middle of a market frenzy pitting amateur traders against hedge fund bigwigs, that veneer began to chip. As it turned out, Robinhood was at the mercy of the very industry it had vowed to upend.

The frenzy morphed into a crisis when legions of armchair investors on Robinhood, who had been buying up options and shares of GameStop, a video game retailer, enlarged those bets and also began making big trades in other stocks, including AMC Entertainment.

As the trading mania grew, the financial system’s risk reduction mechanisms — managed by obscure entities at the center of the stock market called clearinghouses — kicked in on Thursday, forcing Robinhood to find emergency cash to continue to be able to trade. It had to stop customers from buying a number of heavily traded stocks and draw on a more than $500 million bank line of credit. On Thursday night, the company also took an emergency infusion of more than $1 billion from its existing investors.

A high-flying start-up suddenly looked a lot like an overwhelmed, creaky company.

“From a marketing standpoint they position themselves as new, innovative, cool,” said Peter Weiler, the co-chief executive of the brokerage and trading firm Abel Noser. “What I think everyone is missing is, when you peel the onion back they are just a heavily regulated business.”

Robinhood’s distress follows a familiar narrative: A Silicon Valley company that promised to disrupt an industry ends up being overcome by the forces it unleashed and has to be reined in by regulators, or in this case, the industry it promised to change. Its arc is not all that different from Facebook and Google, which changed the ways in which billions of people socialize and search for information, but are now caught in the cross hairs of lawmakers and an angry public.

“They were trying to change the rules of the road without understanding how the road was paved and without any respect for the existing guard rails,” said Chris Nagy, a former trading executive at TD Ameritrade and the co-founder of the Healthy Markets Association, a nonprofit that seeks to educate market participants. “It ended up creating risk for their customers and systemic risk for the market more broadly.”

The fiasco will almost certainly have consequences for the company. The Securities and Exchange Commission said on Friday that it would closely review any actions that may “disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.” Lawmakers on both sides of the aisle called for hearings over complaints that customers were shut out of trades.

After Robinhood limited some trading on Thursday and the price of the stock plunged, furious users flooded online app stores with vitriolic reviews, with some accusing Robinhood of doing the bidding of Wall Street. Others sued the company for the losses they sustained. Robinhood’s continuing vulnerability, even after raising $1 billion, became clear on Friday when it restricted trading in more than 50 stocks.

“It was not because we wanted to stop people from buying these stocks,” Robinhood said in a blog post on Friday night. Rather, the start-up said, it restricted buying in volatile stocks so that it could “comfortably” meet deposit requirements imposed by its clearinghouses, which it noted had increased tenfold during the week.

None of this seems to be slowing down its growth. Even as Robinhood’s actions angered existing customers, it was winning new ones. The app was downloaded more than 177,000 times on Thursday, twice the daily download rate over the previous week, according to Apptopia, a data provider, and it had 2.7 million daily active users on its mobile app that day, its highest ever. That’s more than its rivals — Schwab, TD Ameritrade, E*Trade, Fidelity and Webull — combined.

All Growth, Few Guardrails

Controversy is not new for Robinhood.

The two Stanford classmates who created the company in 2013 said from the beginning that their focus was on “democratizing finance” by making trading available to anyone. To do so, the Menlo Park, Calif., company has repeatedly employed a classic Silicon Valley formula of user-friendly software, brash marketing and a disregard for existing rules and institutions.

Online brokers had traditionally charged around $10 for every trade, but Robinhood said that customers of its phone app could trade for free. The move drew in hordes of young investors.

In building its business, the company disregarded academic research showing how frequent, frictionless trading generally does not lead to good financial outcomes for investors. The risks to customers became clear last summer when a 20-year-old college student’s suicide note blamed a six-figure trading loss for his death.

Robinhood also popularized options trading among novices. An option is generally cheaper than buying a stock outright, but has the potential to lead to much bigger and faster gains and losses, which is why regulators and brokers have traditionally restricted trading in these financial contracts to more sophisticated traders.

Robinhood’s marketing, meanwhile, papered over the fact that its business model, and the free trading, were paid for by selling customer’s orders to Wall Street firms in a system known as “payment for order flow.” Big trading firms like Citadel Securities and Virtu Financial give Robinhood a small fee each time they buy or sell for its customers, typically a fraction of a penny per share. These trading firms make money, in turn, by pocketing the difference, known as the “spread,” between the buy and sell price on any given stock trade, and the more trades they handle, the greater their potential revenue. Many other online brokers rely on a similar system, but Robinhood has negotiated to collect significantly more for each trade than other online brokers, The Times has found.

The mismatch between Robinhood’s marketing and the underlying mechanics led to a $65 million fine from the S.E.C. last month. The agency said that Robinhood had misled customers about how it was paid by Wall Street firms for passing along customer trades.

Robinhood has also run afoul of regulators as it rushed to release new products. In December 2018, the company said it would offer a checking and savings account that would be insured by the Securities Investor Protection Corporation, or S.I.P.C., which protects investors when a brokerage firm fails.

But S.I.P.C.’s then-chief executive said he hadn’t heard about Robinhood’s plan, and he pointed out that the S.I.P.C. doesn’t protect plain-vanilla savings accounts — that would be the job of the Federal Deposit Insurance Corporation. It took almost a year for Robinhood to reintroduce the product, saying in a blog post that it “made mistakes” with its earlier announcement.

“They went in trying to make big splashes and they often had to get reeled back in,” said Scott Smith, a brokerage analyst at the financial firm Cerulli Associates.

The Clash With Wall Street

Robinhood’s ambitions and amateurism collided in recent weeks as small investors, many of them on a mission to challenge the dominance of Wall Street, used its free trades to push up the stock of GameStop and other companies. Rampant speculation on options contracts helped drive the rise of GameStop’s shares from about $20 on Jan. 12 to nearly $500 on Thursday — a rally that forced Robinhood to hit the brakes on its own customers.

One institution that tripped up Robinhood this past week is a clearinghouse called the Depository Trust & Clearing Corporation. Owned by its member financial institutions including Robinhood, the D.T.C.C. clears and settles most stock trading, essentially making sure that the money and the shares end up in the right hands. (Options trades are cleared by another entity.)

But the D.T.C.C.’s role is more than just clerical. Clearinghouses are supposed to help insulate a particular market from extreme risks, by making sure that if a single financial player goes broke, it doesn’t create contagion. To do its job, the D.T.C.C. requires its members to keep a cushion of cash that can be put toward stabilizing the system if needed. And when stocks are swinging wildly or there’s a flurry of trading, the size of the cushion it demands from each member — known as a margin call — can grow on short notice.

That’s what happened on Thursday morning. The D.T.C.C. notified its member firms that the total cushion, which was then $26 billion, needed to grow to $33.5 billion — within hours. Because Robinhood customers were responsible for so much trading, they were responsible for footing a significant portion of the bill.

The D.T.C.C.’s demand is not negotiable. A firm that can’t meet its margin call is effectively out of the stock trading business because D.T.C.C. won’t clear its trades any more. “If you can’t clear a trade, you can’t trade a trade,” said Robert Greifeld, the former chief executive of Nasdaq and current chairman of Virtu Financial. “You’re off the island. You’re banished.”

For veteran players like Citadel Securities and JPMorgan Chase, generating additional hundreds of millions of dollars on short notice was not a problem. But for a start-up like Robinhood, it was a mad scramble.

While it cobbled together the needed cash from its credit line and investors, Robinhood limited customers from buying GameStop, AMC and other shares. Allowing its investors to sell these volatile stocks — but not buy them — reduced its risk level and helped it meet requirements for additional cash, Robinhood said in its blog post.

Ultimately, the company succeeded in pulling together roughly $1 billion from some of its existing investors, including the venture firms Sequoia Capital and Ribbit Capital. As a sweetener, Robinhood issued special shares to those investors that will give them a better deal when the company goes public, as early as this year.

But the quick deal left more than one observer scratching their heads.

“How does an online broker find itself in need of an overnight infusion of a billion dollars?” asked Roger McNamee, a longtime investor who co-founded the private-equity firm Elevation Partners. “There’s something about this that says somebody is really scared about what’s going on.”

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To: Glenn Petersen who wrote (154)1/31/2021 7:24:36 AM
From: Thehammer
   of 196
Robinhood has also run afoul of regulators as it rushed to release new products. In December 2018, the company said it would offer a checking and savings account that would be insured by the Securities Investor Protection Corporation, or S.I.P.C., which protects investors when a brokerage firm fails.

But S.I.P.C.’s then-chief executive said he hadn’t heard about Robinhood’s plan, and he pointed out that the S.I.P.C. doesn’t protect plain-vanilla savings accounts — that would be the job of the Federal Deposit Insurance Corporation. It took almost a year for Robinhood to reintroduce the product, saying in a blog post that it “made mistakes” with its earlier announcement.

If this is really true, then I wouldn't trust a penny to these guys. The difference between FDIC and SIPC is pretty dang basic. It is part of the series 7 that every new broker must take.

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To: Thehammer who wrote (155)2/1/2021 9:54:09 PM
From: Glenn Petersen
   of 196
Cowboys. Presumably, they have changed out their legal team. It will be interesting to see how they fare now that they have attracted the attention of our bottom-feeding, attention-grabbing Congress critters.

The Reddit crowd has done this before. Two years ago they were organizing pumps and dumps of various cryptocurrencies.

Robinhood raises another $2.4 billion as broker app deals with retail trading frenzy



-- Online brokerage Robinhood said it raised another $2.4 billion from investors.

-- That brought to $3.4 billion the firm has raised amid the recent market volatility.

Discount online brokerage Robinhood said Monday it has raised another $2.4 billion from investors amid the extreme bouts of market volatility.

The $3.4 billion it has mobilized since Thursday exceeds the total amount it has raised since its founding in 2013.

“This funding is a strong sign of confidence from investors and will help us build for the future and continue to serve people through the exponential growth we’ve seen this year,” the company said.

“We’re witnessing a movement of everyday people taking control of their own financial futures, many investing for the first time through Robinhood.”

It said it will use the new funding to expand its programs on financial literacy.

“With this funding, we’ll build and enhance our products that give more people access to the financial system,” the company’s statement said.

Robinhood has been in the center of the storm around a move by retail investors over the past week that has squeezed hedge funds that bet big against stocks including GameStop and AMC Entertainment.

As shares in the companies surged, Robinhood placed extreme limits on how much their customers, mainly younger and small-dollar investors, could buy. The company narrowed that list Monday from about 50 to eight.

Investors who had met up online, in particular on Reddit’s WallStreetBets forum, snapped up shares of the companies, forcing some institutional firms into losses. The moves set off a vicious round of volatility on Wall Street that saw the Dow industrials lose close to 3%.

Robinhood and other brokers are required to meet certain deposit requirements from trade clearinghouses. Because of the heavy trading volume, Robinhood said last week it had to impose the restrictions because deposit requirements set by its clearinghouse were much greater that expected.

“We had no choice in this case,” Robinhood co-founder Vlad Tenev said in an Clubhouse discussion with Elon Musk late Sunday Pacific time. “We had to conform to our regulatory capital requirements.”

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To: Glenn Petersen who wrote (156)2/1/2021 10:15:41 PM
From: Thehammer
   of 196
Cowboys. Presumably, they have changed out their legal team. It will be interesting to see how they fare now that they have attracted the attention of our bottom-feeding, attention-grabbing Congress critters.

I guess you have to blame someone. Changing out the legal team though can be a tough transition.

Some of this has been going on forever. Even before the internet - frenzies developed around certain securities and they got bid up to oxygen deprived levels. You didn't have short hedgies on the other side though.

I never quite got the differentiation of Robin Hood as zero cost trades are available all over.

May you live in interesting times!

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From: Glenn Petersen2/25/2021 8:17:09 PM
   of 196
Robinhood is still on track for a hot IPO despite the GameStop uproar

UPDATED THU, FEB 25 202111:00 AM EST
Maggie Fitzgerald @MKMFITZGERAL
Kate Rooney @KR00NEY


-- Robinhood’s user growth, brand recognition and valuation appear to be stronger than ever despite the GameStop trading chaos.

-- The free-trading app gained 3 million users last month alone, according to estimates from JMP Securities and demand for its pre-IPO shares is high.

-- “Despite some positive and negative press, everyone in the world knows who Robinhood is. They couldn’t have better free advertising,” said Rainmaker Securities’ Greg Martin.

Robinhood’s user growth, brand recognition and valuation appear to be stronger than ever as the online brokerage recovers from the GameStop trading chaos.

Demand for Robinhood shares in private markets is surging as the start-up likely benefited from headlines and mentions by politicians and celebrities. Robinhood added gained 3 million users last month alone, according to estimates from JMP Securities.

“From a brand recognition perspective, who doesn’t know who Robinhood is?” said Greg Martin, managing director and co-owner at Rainmaker Securities. “Despite some positive and negative press, everyone in the world knows who Robinhood is. They couldn’t have better free advertising.”

The company, which pioneered zero-commission trading, is still seen as the main gateway for young investors to access the markets. It is expected to go public later this year amid strong demand for fintech stocks such as Affirm, which had its IPO on Jan 13.

Bids for Robinhood’s pre-IPO shares spiked during the GameStop mania last month, according to Rainmaker, which provides financing for shares of private companies. Demand also rose after Robinhood CEO Vlad Tenev testified before Congress last week. It’s also the most bid-upon stock Rainmaker sees in the secondary market right now. The demand surge could be seen as a vote of confidence for Tenev as he navigated a public relations disaster.

These bids are not guaranteed, but they tend to be a good proxy for investor interest in companies at a certain price. One of the most recent bids for Robinhood shares came in at $52 per share — up from around $15 per share in September.

Private market valuations are often opaque. They are based on outside investments as a percentage of the company. They can also be hard to calculate without knowledge of a start-up’s assets and outstanding shares. But based on that pop in bid prices, one investor told CNBC that Robinhood’s valuation could be as high as $40 billion — more than triple its last publicly disclosed number.

“With the amount of capital they now have, I expect the company will be the dominant brokerage going forward, and I think the market will acknowledge that,” said Martin, who is also the founder of Liquid Stock. “The valuation could be very large in the very near future which bodes well for an IPO.”

Robinhood declined to comment on its IPO timing and valuation.

The Silicon Valley start-up found itself in the middle of a firestorm last month amid the short squeeze in GameStop, which was partially fueled by Reddit-driven retail investors. At the height of GameStop’s surge, the millennial-favored brokerage restricted trading of certain securities due to increased capital requirements from clearing houses.

Demand from Silicon Valley

Robinhood’s decision to restrict trading was met with outrage from traders online. Still, its private investors flocked to back the company. Some venture capitalists responsible for the $3.4 billion in emergency capital cited the app’s ability to add customers amid the trading turmoil.

Three of Robinhood’s private investors said there was “strong demand” to get a piece of the company, even as it stared down a public relations and regulatory crisis.

The financing came in the form of convertible debt, sources said. That debt will convert to equity when the brokerage goes public, and those investors will get a 30% discount on the market price. One venture capitalist told CNBC he and fellow investors believed the company would go public soon, and the debt round was a chance to “get in at a discount.”

JMP Securities analyst Devin Ryan estimates Robinhood’s total accounts are now closer to 23 million, including the 3 million gained in January and 10 million users added in 2020 as investing from home boomed during the pandemic.

Robinhood’s Tenev told Congress last week the company had delivered more than $35 billion in realized gains to investors, which implies big growth in customers and customer assets. Its average account size is about $5,000, the company said.

Tenev, who co-founded Robinhood eight years ago, answered questions from members of the House Financial Services Committee for more than five hours last Thursday. The Robinhood chief was tempered in his responses, and calmly explained that the billions in cash injections were needed to prevent a liquidity crisis from happening.

One investor, who asked not to be named because company strategy was private, said Tenev’s testimony “went well” despite being “painful to watch at times,” due to varying degrees of understanding of Robinhood’s business model from those in Washington.

“Robinhood emerged from this — there certainly was a hit on the company but we’re fully committed to working through that,” the investor said.

Another investor told CNBC that Robinhood backers “are feeling pretty good” about Tenev’s performance. After 48 hours of the GameStop saga, he said it was clear the Twitter backlash was “insular” as the company continued to add hundreds of thousands of new accounts that week.

“Growth has been great, despite Robinhood taking the brunt of press and questions from Congress —Vlad’s done a great job, and as good as he could have done given the situation,” he said. “He was sitting at the nexus of potentially pissing off regulators, customers and competitors.”

Some analysts say new regulation could hinder the legal, but controversial, practice of payment for order flow, hurting the IPO’s prospects. However, Robinhood investors say its value lies in user engagement, not the revenue model. Investors pointed to its position atop the Apple app store, even as it was restricting customers from trading certain stocks.

“It’s the fastest growing consumer app, and has better engagement than social media,” another investor told CNBC. “The majority of those new traders won’t be trading GameStop.”

Robinhood users ... investing in Robinhood?

Some critics, most notably Barstool CEO Dave Portnoy, believe Robinhood’s brand — built on democratizing investing — won’t survive the GameStop trading halts.

However, many expect retail demand for Robinhood’s offering to be strong, given it’s the vehicle that lets rookie investors access the stock market with little friction.

Robinhood could hit the public markets by way of a direct listing or through a special purpose acquisition company, people familiar with the private dealings told Bloomberg News. It has also reportedly considered allowing investors on its platform to invest directly in the Robinhood IPO.

Airbnb followed a similar playbook by offering shares to their hosts, and the stock more than doubled in public-market debut because of retail participation. Snowflake was another stock that surged on its first day of trading, which some speculate was due to much higher-than-expected retail demand for the name.

With a public debut in mind, Robinhood is now talking about the future of the investing boom it helped spark. Some analysts have floated the idea of Robinhood launching more banking products, or even mortgages, on the millennial-focused app.

The future may also involve more brokerage firms combining stock trading and social media into their platforms, Tenev told CNBC’s Andrew Ross Sorkin at the Dealbook DC Policy conference this week. Brokerage firms SoFi and Public already offer this feature.

As for what happened with GameStop, Tenev called it a “5-sigma” event — meaning it had about a 1 in 3.5 million chance of occurring. Robinhood should have enough capital now to deal with regulatory requirements associated with frenzied trading, he said.

But the GameStop volatility doesn’t seem to be going away. Investors poured back into the video game retailer on Wednesday, sending shares up more than 100% at one point.

— with reporting from CNBC’s Crystal Mercedes.

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From: The Ox2/28/2021 10:07:11 PM
   of 196
Any thoughts on MoneyLion - FUSE SPAC?

Another Fintech Is Going Public Through a Blank-Check Company, in a $2.9B Deal

Luisa Beltran

Feb. 12, 2021 5:47 pm ET

MoneyLion will have an enterprise value of $2.4 billion once its merger with a SPAC closes.
Courtesy of MoneyLion

MoneyLion is the latest fintech to go public through a blank-check company.

The digital financial platform said Friday it agreed to merge with Fusion Acquisition (ticker: FUSE), the special purpose acquisition vehicle that is chaired by James Ross, the former chairman of State Street Global Advisors’ global SPDR ETF business. MoneyLion will have an enterprise value of $2.4 billion once the deal closes, which is expected during the first half of the year. The transaction also includes a $250 million private investment from investors such as BlackRock (ticker: BLK) and Apollo Global Management (APO).

The equity value of MoneyLion jumps to $2.9 billion once $350 million from the SPAC and $250 million from the private investment are included, a statement said. MoneyLion will receive $526 million in net proceeds.

Fusion will be renamed MoneyLion and it will trade on the New York Stock Exchange once the merger is completed. News of the sale caused Fusion shares to shed more than 5%, or 63 cents, to close at $11.57 Friday.

Accessing capital markets “allows us to raise awareness of MoneyLion …to the 100 million plus Americans who are disadvantaged through the current financial system,” said Dee Choubey, MoneyLion CEO and co-founder, in an interview.

Launched in 2013, MoneyLion provides products to help consumers save, borrow money, and invest. Its mobile banking product, RoarMoney, lets members get paid up to two days early. The start-up has 7.5 million members. MoneyLion has raised $230 million in funding from investors, including venture-capital firms Edison Partners and Greenspring Associates. MoneyLion shareholders will own about 76% of the combined company once the sale to Fusion closes, the statement said.

The New York start-up will be looking to add more features and products including pay over time and a secured credit card, as well as a cryptocurrency platform that Choubey said will be “done in a safe way.” MoneyLion, which employs 300 people, will also seek to hire, adding 5% to 10% more staff in the short term, Choubey said.

The New York fintech generated $76 million of adjusted revenue in 2020, which it expects will jump to $144 million in adjusted revenue the following year, a statement said.

MoneyLion didn’t consider a sale but it did look at other methods of going public, including a traditional initial public offering and a direct listing, Choubey said. A SPAC is “an efficient way to become public,” he said.

Fusion Acquisition Corp. is the first blank-check company from Ross. Fusion went public in June, raising $350 million. Ron Suber, the former president of Prosper Marketplace and a noted fintech investor, introduced MoneyLion to Ross. Talks between the two parties began in July, Choubey said.

“MoneyLion is at the perfect high-growth inflection point that makes accessing public markets a logical next step,” said John James, founder and CEO of Fusion, in a statement. James is the co-founder and CEO of BetaSmartz.

MoneyLion is the latest fintech to sell to a SPAC. Payoneer is merging with noted fintech pioneer Betsy Cohen’s latest blank-check company in a $3.3 billion deal. In December, Paysafe said it was combining with a SPAC from William P. Foley II, a noted financial services investor, in a $9 billion deal.

Adi Jayaraman of Citi, Greg Phillips of Broadhaven, and Steve McLaughlin of FT Partners provided financial advice to MoneyLion. Davis Polk & Wardwell acted as legal advisor to MoneyLion. John Hall of J.P. Morgan Securities LLC served as financial advisor and lead placement agent to Fusion. Cantor Fitzgerald acted as capital markets advisor to Fusion and White & Case was the attorney Fusion. Citi, Cantor Fitzgerald and Odeon Capital Group also acted as co-placement agents on the PIPE.

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To: The Ox who wrote (159)2/28/2021 10:11:33 PM
From: The Ox
1 Recommendation   of 196
Why Is No One Talking About LendingClub Stock?

Once a hot IPO, LendingClub fell from grace. Hard. But a turnaround could be in the offing.
Billy Duberstein (TMFStoneOak) Feb 28, 2021 at 8:15AM

It's been a difficult six years for LendingClub ( NYSE:LC) as a public company. After coming to market in late 2014 as a new-age fintech platform at a $5.4 billion valuation, the company has since plunged to just a fraction of that, with a current market cap of only $850 million.

So, what happened to LendingClub? Things started going wrong in 2016, when its founder and former CEO, along with some executives, were caught doctoring some details on loan requirements in order to move more loans through its platform. LendingClub had set itself up as a peer-to-peer lender, with retail investors buying high-yield loans from borrowers. LendingCLub acted as a scaled "marketplace," offering investors diversified pools of parts of loans, while borrowers could get personal loans at lower rates than credit cards, since LendngClub didn't have any brick-and-mortar infrastructure.

The thing was, LendingClub was dependent on volume, and it seems the founder cut corners in pursuing growth. Not only that, but LendingClub's loans started to experience increased chargeoffs in 2016 as the economy slowed.

The stock has never recovered from the fallout, as the company was caught up in costly lawsuits and a business model retrenching ever since. New CEO Scott Sanborn has been transforming the business over the past few years, which may have soured the original investors in LendingClub, without attracting more traditional financial stock investors.

However, I think better days are ahead for LendingClub, which just closed a potentially transformative acquisition just on February 1 and could be on the brink of a big turnaround.


LendingClub was turning the corner prior to COVIDThings were actually looking pretty positive for LendingClub and its turnaround just before COVID hit. After the 2016 scandal, LendingClub slowed originations, and aimed more at prime borrowers with tightened underwriting. In addition, LendingClub sought out more stable institutional investors, such as banks, insurance companies, and other professional funds. This has helped stabilized the funding side of the platform, as these institutions are fine with lower yields in exchange for safer investments. They are also much less "flighty" than individual retail investors lured in by high yields. And the company has also innovated more products, including liquid, tradable securities made up of LendingClub loans on several different platforms, opening its loans up to more types of investors.

That slowed down LendingClub's growth, but was likely necessary. Any company involved in lending is always tempted to boost growth in the near-term, but making too many bad loans can come back to bite you in the long-term, as LendingClub painfully learned.

Still, LendingClub did, prudently and methodically, increase originations between 2017 and 2019, from $9 billion in originations in 2017 to $12.3 billion in 2019. Margins also increased, due to both scale and management efforts to cut costs. The company even reach adjusted net income profitability for the first time in years in the third quarter of 2019. Even after it slowed down originations, LendingClub was still the largest originator of personal loans in the U.S.

Covid-19 cons and prosFor sure, the COVID-19 downturn wasn't great for any financial company. At the onset of the pandemic, the company immediately pulled back on lending, cutting originations by 87% quarter-over-quarter in Q2, then slowly increasing in Q3, with another expected increase in Q4. Still, originations and revenues will still be down a lot from the prior year. Obviously, LendingClub's adjusted net margins went negative this year once again.

However, there are some silver linings. The company has continued to cut costs, and its loans made pre-pandemic are holding up well. LendingClub expects that pre-COVID loan vintages are still averaging 4% returns, which is not too far below their original expected return. And post-COVID loans are forecast to return between 5%-6%. Investors are also returning to the platform after a justified hiatus after COVID broke out, increasing loan buys in Q3 and Q4.

One of the fears around LendingClub was how its loans would hold up in a financial downturn. So far, so good.

Radius could be a game-changerLendingClub's stock is just making its way back to pre-COVID levels, but the recent closing of the Radius Bank acquisition on February 1 could change the story. Radius is a digital-only bank headquartered in Boston. At the time of the announced acquisition just before COVID, Radius had $1.4 billion in assets and $1.2 billion in deposits.

At first glance, it appears that LendingClub paid a somewhat expensive price for Radius, buying it for $185 million, equal to 1.72 times book value and 28.6 times 2019 earnings. However, that's only the beginning of the story.

LendingClub is also set to reap some $40 million in annual cost synergies from the deal, including lower regulatory costs (from having an in-house bank), as well as lower funding costs from deposits. Remember, LendingClub wasn't a bank prior to this, and had to fund a lot of its loans in the short-term with higher-cost warehouse lines.

Not only will the company reap those cost synergies, but LendingClub will also be able to hold more loans on its balance sheet against its deposits, keeping the extra economics for itself. Of course, LendingClub will still be a marketplace, but the ability to hold more loans itself if need be will take care of the funding vulnerability in rough times, and should lead to an extra $40 million in profit for every $1 billion held on its books.

If you add that on, that's potentially an additional $80 million pre-tax income LendingClub can make as a result of the acquisition. If these benefits are achieved, LendingClub is really only paying two times pre-tax earnings for Radius. Quite a steal!

Call it a comeback?As the economy recovers from COVID, there's a pretty good shot that we could enter a strong period of GDP growth, which should benefit financial stocks. When you consider LendingClub's stock is still quite depressed from several years ago, even while the business has been transformed with a much better cost structure coming out of the crisis, and LendingClub looks like a compelling turnaround story for value investors to explore. The company reports fourth quarter results on March 10.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Billy Duberstein owns shares of LendingClub. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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From: Glenn Petersen3/2/2021 6:47:06 AM
2 Recommendations   of 196
Square’s bank arm launches as fintech aims ‘to operate more nimbly’

Mary Ann Azevedo 19 hours
March 1, 2021

Known for its innovations in the payments sector, Square is now officially a bank.

Nearly one year after receiving conditional approval, Square said Monday afternoon that its industrial bank, Square Financial Services, has begun operations. Square Financial Services completed the charter approval process with the FDIC and Utah Department of Financial Institutions, meaning it’s ready for business.

The bank, which is headquartered in Salt Lake City, Utah, will offer business loan and deposit products, starting with underwriting, and originating business loans for Square Capital’s existing lending product.

Historically, Square has been known for its card reader and point-of-sale payment system, used largely by small businesses — but it has also begun facilitating credit for the entrepreneurs and smalls businesses that have used its products in recent years.

Moving forward, Square said its bank will be the “primary provider of financing for Square sellers across the U.S.”

In a statement, Square CFO and executive chairman for Square Financial Services Amrita Ahuja said that bringing banking capability in house will allow the fintech to “operate more nimbly.”

Square Financial Services will continue to sell loans to third-party investors and limit balance sheet exposure. The company said it does not expect the bank to have a material impact on its consolidated balance sheet, total net revenue, gross profit or adjusted EBITDA in 2021.

Opening the bank “deepens Square’s unique ability to expand access to loans and banking tools to underserved populations,” the company said.

Lewis Goodwin had been tapped to serve as the bank’s CEO, and Brandon Soto its CFO. With today’s announcement, Square also announced the following new appointments:

Sharad Bhasker, Chief Risk Officer
Samantha Ku, Chief Operating Officer
Homam Maalouf, Chief Credit Officer
David Grodsky, Chief Compliance Officer
Jessica Jiang, Capital Markets and Investor Relations
The fast-growing company, which sells a credit card tailored for startups, with Emigrant Bank currently acting as the issuer, said that it had submitted an application with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions (UDFI) to establish Brex Bank.

A number of fintech companies, or those with fintech services, have spun up products typically offered by banks, including deposit and checking accounts as well as credit offerings. Often, these are designed to provide capital to customers who might not be able to get funding on favorable terms from traditional banking institutions, but who might qualify for business-building loans from a provider who knows their company, like Square, inside and out.

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