Prosper officially files with the SEC

[traveler505]

Has there been any discussion of Prosper's plan to offer "previously-funded borrower loans" for sale on its platform?   IMO, that's the strangest part of the whole S-1 document.

As I understand it (and I've only lightly skimmed the S-1), financial institutions (e.g. banks) would be able to list loans  which they originated or purchased -- including both secured and unsecured loans -- for sale on the Prosper platform.   Prosper lenders bidding on these loans would be stepping into the role that hedge funds, investment banks, and other professional investors played before the September credit freeze.  (Ummmmmm......ouch.)

Is this a stroke of genius on Prosper's part: grabbing a role in bailing out the financial industry and freeing up funds for banks to re-loan?   Are they expecting federal subsidies if they do this?  Or is this the first step toward abandonment of the P2P concept, and re-purposing the platform? 

[xraider]

Name and Principal PositionYear Salary($) Bonus($) Option Awards ($)(1)All Other Compensation  Totals
 
Christian A. Larsen, Chief Executive Officer 2007 $150,000 — — —                                       $  150,000
 
John Witchel, former Chief Technology Officer(2) 2007 $ 150,000 — — —                               $ 150,000
 
Edward A. Giedgowd, Corporate Secretary, General Counsel 2007 $ 175,000 $25,000 $11,971— $ 211,971
 
Kirk T. Inglis—Chief Financial Officer  2007 $ 180,000 — — —                                           $180,000   

(2) Mr. Witchel resigned as our Chief Technology Officer on July 31, 2008.

 

I am actually a little surprised that the numbers here are so low.   With the housing prices in SF, how do they afford to live "comfortably" there?

They're making lots on the interest on their brilliantly picked Prosper loans.

[xraider]

That prospectus is extremely frightening.  I can't imagine that anyone who reads the risks would ever participate in a Prosper loan.

To me, that prospectus says:

• We make loans to high risk individuals.
• We contract with collection agencies in case these high risk individuals don't pay.
• These collection agencies aren't particularly effective.
• This isn't much of a surprise because on the 22% of loans we bother to verify, more than a third were found to be lying.
• Oh, and we're the subject of a class action for our prior bad acts.

Morrison & Foerster is a very reputable -- and expensive -- law firm, and I'm surprised they got anywhere near this.

Interesting question on the rescission.  It's my bet that courts will require class members to allow ALL of their loans (good and bad) to be rescinded, or none.  I don't think class members will be permitted to keep the good loans and rescind the bad.  As it stands right now, for me, with interest on the principal I loaned, plus the ongoing risk of further charge-offs, I'd take the rescission. 

[beerbud1]

That prospectus is extremely frightening.  I can't imagine that anyone who reads the risks would ever participate in a Prosper loan.

To me, that prospectus says:

• We make loans to high risk individuals.
• We contract with collection agencies in case these high risk individuals don't pay.
• These collection agencies aren't particularly effective.
• This isn't much of a surprise because on the 22% of loans we bother to verify, more than a third were found to be lying.
• Oh, and we're the subject of a class action for our prior bad acts.

Morrison & Foerster is a very reputable -- and expensive -- law firm, and I'm surprised they got anywhere near this.

Interesting question on the rescission.  It's my bet that courts will require class members to allow ALL of their loans (good and bad) to be rescinded, or none.  I don't think class members will be permitted to keep the good loans and rescind the bad.  As it stands right now, for me, with interest on the principal I loaned, plus the ongoing risk of further charge-offs, I'd take the rescission. 

So, ugh Can we safely assume you will opt-in and become a class member?

[xraider]

Probably.  Why would I possibly want to keep ANY of my money with Prosper a minute longer than I have to? 

As it stands right now, my value of loans has dropped to $1,279.55, with net gain of $230.20 after charge-offs.  However, I have 3 in bk with principal of $106, and 2 lates.  Plus, I still have 33 current loans, several of which have gone late more than once.  While I don't have a lot of money at risk with Prosper, it's still really aggravating.

However, as an unnamed class member, I can see where things are when the dust settles, and see what's available to class members.

On a side note, I'm very surprised that a motion for class certification has been filed.  Those are usually heard LONG after the complaint has been served and some discovery has been taken.  The court website is down right now so I can't read it, but don't be surprised if the class cert motion isn't heard for many months.

[Fred93]

Morrison & Foerster is a very reputable -- and expensive -- law firm, and I'm surprised they got anywhere near this.

But they did a really nice job, didn't they?

I've worked with Pillsbury, who wrote the crap S-1 a year ago, and had a very good experience.  Not sure what happened there. 

[112233]

LC is one step ahead of them on this. They can't afford the risk of being a cheapo.

[ira01]

That prospectus is extremely frightening.  I can't imagine that anyone who reads the risks would ever participate in a Prosper loan.

To me, that prospectus says:

• We make loans to high risk individuals.
• We contract with collection agencies in case these high risk individuals don't pay.
• These collection agencies aren't particularly effective.
• This isn't much of a surprise because on the 22% of loans we bother to verify, more than a third were found to be lying.
• Oh, and we're the subject of a class action for our prior bad acts.

Morrison & Foerster is a very reputable -- and expensive -- law firm, and I'm surprised they got anywhere near this.

I agree with all this, except the last comment -- why wouldn't MoFo do this work?  It is legal, it is not unethical to prepare an SEC filing even if the underlying investment is not a good one, and so long as Prosper pays them, of course they took the work. 

Interesting question on the rescission.  It's my bet that courts will require class members to allow ALL of their loans (good and bad) to be rescinded, or none.  I don't think class members will be permitted to keep the good loans and rescind the bad.  As it stands right now, for me, with interest on the principal I loaned, plus the ongoing risk of further charge-offs, I'd take the rescission. 

I can see both sides of this issue.  On the one hand, it seems a little untoward (and a little too clever) for lenders to be able to dump only the bad loans, but keep the good.  On the other hand, each loan is a separate security that Prosper unlawfully sold in a separate transaction.  So it isn't immediately obvious to me why lenders should not be allowed to rescind some transactions, but affirm others.  I have no idea whether there is any case law that addresses this issue.

If you are correct, I would think that the vast majority of lenders would be better off rescinding, although each would have to crunch the numbers for him/herself.  If the legal rate of interest (what Prosper would have to pay lenders who rescind) is 10%, there are relatively few lenders with an ROI greater than that -- out of 13,132 lenders with >20 loans and an average loan age >9 months today, there are only 323 of them (2.5%) with an ROI >10%.  Of course WHEN the election would have to be made is important -- right now, there are probably a lot of newbie lenders who think that they are going to make a lot more than 10% on their loans (for example, ResearchPro).  So if forced to elect now, they might choose to stick with Prosper.  But a year from now, they'll be singing a different tune as they see all the deafults pile up.

[xraider]

I dunno, Ira.... I'm not so sure I'd want my law firm's name linked to a dirty company.  It leaves you open to all kinds of lawsuits, or, at the very least, depositions.  But that's just me.

[ira01]

I dunno, Ira.... I'm not so sure I'd want my law firm's name linked to a dirty company.  It leaves you open to all kinds of lawsuits, or, at the very least, depositions.  But that's just me.

Prosper is incompetent, uses misleading advertising, and sold unregistered securities.  But it isn't like it was just a big ponzi scheme, where the owners just stole all the money, or anything like that.  And even if it were, those con artists get good legal representation if they can pay the legal bills too.  For example, Enron, WordCom, and the like were far more "dirty" than Prosper -- yet I'm sure they had prestigious big firms representing them after their collapse.

[mtolman]

I have been reading through the SEC filing and this caught my attention:

"You should be aware that the Notes offered through the Platform are risky and speculative investments suitable only for investors of adequate financial means. If you cannot afford to lose the entire amount of money you plan to bid and commit to Borrower listings on the Platform, you should not attempt to invest in the Notes."

Looks like they are being a lot more cautious this time around in regards to how they are describing the potential performance of the loans.

[Beachey]

<poof>

[JammingJAY]

Hi xraider.

[Uncle_Pennybags]

I wonder which pal owned that domain?

According to domaintools.com, the domain "prosper.com" was owned by A Emmet Stephenson from 2001 thru early 2006.  Well, he listed the owner as "prosper.com, Inc", which means nothing, and he he was the administrative contact.  I doubt that there was a business by that name.  This is a common dodge to keep a low profile.

In February of 2006, the name servers were changed from lmi.net to name-services.com .  This likely corresponds to the "purchase" described in the S1.  However, Emmet's name remained as the administrative contact until January of 2008 at which time it was changed to Ron Pugh.  The late name change may mean something, or it may have been an oversight.  Domaintools says Emmet owns 136 domains, but it wants money to let me see their names, and I declined.

Looks like Emmet has done well with his domain name investments.  I have not done so well.  I have a dozen or so names.  Once a guy offered me $25 for one of 'em.

Pretty sure that is the same guy that ran StarTek, Inc back in the day.  From one of their old press releases:  "StarTek, Inc. headquartered in Denver, Colorado, combines two of today's most outstanding business opportunities -- our established position as a leading global provider of outsourced process management services and ownership interests in proprietary Internet web site businesses arising from a portfolio of world class brand Internet domain names."  These days they are big in offshore outsourcing.  Real value add kinda guys.

[HollowOak]

ResearchPro responded to Ira01's post. I believe that entire discussion was off-topic in this thread, so I split it. It's here.