Dateline: April fools day on new Prosper Funding

[bamalucky]

These are warrants.  They have te repaid before lenders.  Kinda like preferred stock.  Lenders aren't gonna be first in line as prosper continues to borrow.  To all current lenders , every dollar you lend adds to their existing collateral IMO

[yankeefan]

I read it as being notes with warrants (and convertibility to preferred stock) attached.   The notes (loans) are unsecured, and may rank even with lender's notes (but without the possible claim on the borrower's payments that the retail lenders may have.

The warrants wouldn't have any claim on value of Prosper- but are a right to buy stock at the indicated price.

The preferred stock would pay before the common stockholders get anything, but after the lenders.

[mothandrust]

I don't see that this loan is senior to the Borrower Dependent Notes or secured by them; my guess is that it would rank equally with the BDN's and Prosper's other unsecured obligations.

[mothandrust]

Remember when people used to wonder about who was getting stock options?  Then Prosper was getting stock investors.  Next they issued preferred stock.  Now it's unsecured Notes...and at 15%!

There is a very scary progression here.

[cowdiddly]

Great it's starting to look like any loan I have where the payment date is later than the 25th has a strong possibility of only getting two more payments out. I am truly sunk.  

[Senator]

Loan is featured on the Blog today.
Prosper VC’s Bridge to Series D Fund Raise

Please forgive me if I quote the blog entry as these things have a tendency to get poofed.

Prosper VC’s Bridge to Series D Fund Raise

02/3/10 posted by Prosper Blog   

As many have presumed, Prosper is in the process of raising another round of capital to continue building what is emerging as the future of consumer and small business financing. The process is going well and we have strong interest from a number of world class investors. We look forward to announcing our Series D round soon.

In the interim, we are very pleased to announce a $2 million financing bridge from our existing investors: Accel Partners, Benchmark Capital, DAG Ventures, Meritech Capital, Omidyar Network, and Volition (formerly Fidelity Ventures). As always, we are greatly appreciative of their unwavering support and excitement about Prosper and the enormous opportunity before us.

The fund raise is one of many developments we’re excited about at Prosper. First and most importantly, as a result of the changes we introduced last July, we’re pleased that estimated lender returns are tracking very well. In addition, continuing to attract high quality borrowers – the cornerstone of great lender returns – is our top priority as evidenced by the recent additions to our leadership team. With the persistent disruption of the traditional banking system, there is a world of opportunity to drive great loan assets to our lenders. However, we will be disciplined in our approach to the risk/return tradeoff, meaning we will grow volume responsibly and steadily.

As peer-to-peer lending enters the next stage of its evolution, it is clear that the industry will become a third way of banking. A way that is more durable and transparent than the now discredited Wall Street securitization schemes; more opportunistic for lenders; and fairer for borrowers compared to credit card companies in particular.

We look forward to continuing to keep you apprised of our progress and major developments. Your support is immensely appreciated.

[Staneslav]

I really worry that this is turning into a ponzi scheme. A lender funds a loan, but doesn't get the payments if prosper BKs? As propser obtains more and more debt, their payment burden gets higher until they cannot pay anymore.

[NewHorizon]

In addition, continuing to attract high quality borrowers – the cornerstone of great lender returns – is our top priority as evidenced by the recent additions to our leadership team.

I missed how the new members of the leadership team translates into high quality borrowers?
(And, btw, doesn't this say something about John Witchel?   )

[alexpkeaton]

My comment on the blog:

How is Prosper different from “discredited Wall Street securitization schemes”? Isn’t Prosper doing the exact same thing by selling derivative securities based on a stream of debt payments while assuming no risk itself?

Let's see if it gets posted...

[NewHorizon]

However, we will be disciplined in our approach to the risk/return tradeoff, meaning we will grow volume responsibly and steadily.

So now Prosper has a hand in which borrowers can apply for funding.
Not necessarily a bad thing.  But my how things have changed.  These quaint notions seem to be fading away:

When someone seeks a loan on Prosper, the site's participating lenders "decide who and what get funded, rather than an elite group of bankers," said Chris Larsen....

http://www.nytimes.com/2008/10/01/business/smallbusiness/01webfund.html?_r=1

LARSON (sic): It's really kind of giving the power of underwriting, the power of where does capital get allocated directly to individuals.

http://marketplace.publicradio.org/display/web/2007/01/19/a_new_way_to_get_a_loan/

[Mark12547]

American Banking News has chimed in:
Prosper Marketplace Announces $2 Million in Bridge Financing as Bankruptcy Fears Loom

[MatthewDP]

Prosper sure did a nice job of spinning this one... "We have $2 million in new funding" sounds a lot nicer than "We took out a $2 million loan that we have to repay in 2 months"

[NewHorizon]

Prosper sure did a nice job of spinning this one... "We have $2 million in new funding" sounds a lot nicer than "We took out a $2 million loan that we have to repay in 2 months"

Kinda like borrowers who want to take out a Prosper loan to be "debt free"...

[bamalucky]

My redneck math puts this at 75k profit for a 2 month loan

[Senator]

My redneck math puts this at 75k profit for a 2 month loan

My napkin says $50K profit.