LendingClub Corp. named Scott Sanborn to replace its founder and chief executive officer, who resigned unexpectedly last month, and said it will dismiss 179 employees to cope with the decline in loan volume caused by the turmoil.
Second-quarter loan originations will be about a third lower than in the previous three months, the San Francisco-based company said Tuesday in a statement.
Sanborn, 46, was named acting CEO in May and has been working to shore up investor confidence hurt by the resignation of Renaud Laplanche and other executives. The management upheaval and revelations about disclosure lapses led some investors to stop buying the loans that the company arranges online. The shares, which tumbled 61 percent this year through Monday, advanced 3.3 percent at 7:19 a.m. in New York.
"Scott and the management team have demonstrated they can lead LendingClub through this turbulent time," Hans Morris, who was named the company's chairman, said in the statement. "With today's announcements and Scott at the helm, LendingClub is now in a position to move forward."
The annual shareholders' meeting, which was postponed three weeks ago to give the firm more time to prepare, will take place Tuesday, LendingClub said.
The company, which said it had substantially concluded its internal review, disclosed two new issues. In December 2009, in order to make LendingClub's volume appear larger, the former CEO and three of his family members took out 32 loans, the company said Tuesday in a regulatory filing. The loans, which amounted to $722,800 in originations and $25,000 in revenue, were repaid in full, according to the filing.
A spokesman for Laplanche didn't respond to an e-mail and a phone call placed before the start of regular business hours.
LendingClub also said the valuations of six private funds weren't consistent with generally accepted accounting principles. Reimbursing the affected investors will cost $800,000, it said.
LendingClub was a market darling just 18 months ago. Its stock soared after an initial public offering in December 2014, briefly valuing the firm at more than $10 billion. The price soon began sliding amid mounting competition, the specter of more regulation and concern the company might not find enough investors to fuel growth.
On May 9, LendingClub stunned shareholders by announcing Laplanche, who served as CEO and chairman, had resigned after internal reviews. The board cited two incidents: Staff had altered application dates on $3 million of loans before their sale, and Laplanche failed to disclose his interests in a fund that LendingClub was considering investing in. The firm said in Tuesday's statement that it was changing its policies to prohibit such investments. LendingClub said on May 16 that it received a grand jury subpoena from the U.S. Justice Department.
The 179 dismissals amount to about 12 percent of LendingClub's workforce, according to the regulatory filing. Revenue growth will restart next year, LendingClub said.
