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[havastat]

The approach gives Prospert a chance to pitch major lending investors to exercise their warrants in a few months, when it will really need money if it can't get cash from its VC investors.

I suppose it can figure out what's a fair price then.

[alexpkeaton]

No.  Not exactly.  You aren't exactly "buying in" until you choose to exercise the warrants.

That's what I meant. Warrants aren't worth anything unless you intend to exercise them. It seems like Prosper wants investors to think they'll get in on this hot new startup (read: 5 years old and failing). People blinded by greed will likely be more fearful of missing the opportunity and not bother doing any research. Gee, sound familiar?

[onthefence]

The approach gives Prospert a chance to pitch major lending investors to exercise their warrants in a few months, when it will really need money if it can't get cash from its VC investors.

I suppose it can figure out what's a fair price then.

   Stockholders' Equity
   Convertible preferred stock – Series A ($0.001 par value; 4,023,999 shares authorized, issued and outstanding as of September 30,
2010 and December 31, 2009)
   Convertible preferred stock – Series B ($0.001 par value; 3,310,382 shares authorized, issued and outstanding as of September 30,
2010 and December 31, 2009)
   Convertible preferred stock – Series C ($0.001 par value; 2,063,558 shares authorized; issued and outstanding as of September 30,
2010 and December 31, 2009)
   Convertible preferred stock – Series D ($0.001 par value; 20,543,819 shares authorized; 20,340,705 issued and outstanding as of
September 30, 2010)
   Convertible preferred stock – Series D-1 ($0.001 par value; 3,110,188 shares authorized; 3,110,188 issued and outstanding as of
September 30, 2010)
   Common stock ($0.001 par value; 43,563,435 shares authorized; 4,478,667 and 4,460,667 shares issued and outstanding as of
September 30, 2010 and December 31, 2009, respectively)

[kenL]

The promotion is not much different than the promotion for Nov. and Dec. of last year.

They better get the listings up if they intend to match the lending demand.

You don't need to be a rocket scientist to figure out what going on. Phase 1 is over. That was to prove that lending can be profitable for lenders and in the meantime do some tweaking and experiment with promotions while maintaining constant orginations/month (which they did for a year) also giving new lenders time to get some experience. Now it's phase 2. Boost originations.

Funny, when I proposed this theory here several months ago, I was asked what I was smoking and told I was nearly delusional. But it does seem like that is what is going on.

[312lender]

Ken,
You have been, and continue to be, one of the few voices of reason on this site.

[havastat]

I honestly doubt Prosper intended or planned flat originations for a year.

[kenL]

I honestly doubt Prosper intended or planned flat originations for a year.

If you knew how flat it was, you would change your mind.

[Senator]

How do you know lending will still be profitable once originations are boosted?  Won't Prosper need more borrowers of the same quality?  Do they even exist?

[kenL]

How do you know lending will still be profitable once originations are boosted?  Won't Prosper need more borrowers of the same quality?  Do they even exist?

I don't know that. As a lender I can only hope they continue to perform so well.
I will continue to observe the data watching for any change in peformance.

[God-Father]

How do you know lending will still be profitable once originations are boosted?  Won't Prosper need more borrowers of the same quality?  Do they even exist?

It is a big country.

[JohnCalmus]

I honestly doubt Prosper intended or planned flat originations for a year.

If you knew how flat it was, you would change your mind.

Ken, what do you mean by this statement?

[kenL]

For a year on average they did $500,000 in originations per week. Whenever they started to dip below that they ran some kind of promotion, like the 1% on all bids promotion (they didn't try that again) or the 2% one day only bonus, which they extended for a couple days IIRC. Not a whole lot of bonus giving during that year, but nevertheless some and it was very targeted, coming at times when originations were waning.

At least that's how it appeared to me.

[Xenon481]

For a year on average they did $500,000 in originations per week. Whenever they started to dip below that they ran some kind of promotion, like the 1% on all bids promotion (they didn't try that again) or the 2% one day only bonus, which they extended for a couple days IIRC. Not a whole lot of bonus giving during that year, but nevertheless some and it was very targeted, coming at times when originations were waning.

At least that's how it appeared to me.

That's called trying to keep originations UP to at least $2m/mo and barely succeeding, not trying to keep them flat down at $2m/mo.

[JohnCalmus]

For a year on average they did $500,000 in originations per week. Whenever they started to dip below that they ran some kind of promotion, like the 1% on all bids promotion (they didn't try that again) or the 2% one day only bonus, which they extended for a couple days IIRC. Not a whole lot of bonus giving during that year, but nevertheless some and it was very targeted, coming at times when originations were waning.

That's an interesting theory. I was assuming this whole time that they gave less promotions than Lending Club just because they had less cash to burn. According to the September 2010 10-Q forms, Prosper had about 6.5 million in cash, and Lending Club had about 21 million. I haven't looked in detail at all of the 10-Q forms, so I could be wrong, but I was assuming Lending Club had a cash advantage stemming from higher origination rates and more VC money throughout most of 2010.

[JohnCalmus]

For a year on average they did $500,000 in originations per week. Whenever they started to dip below that they ran some kind of promotion, like the 1% on all bids promotion (they didn't try that again) or the 2% one day only bonus, which they extended for a couple days IIRC. Not a whole lot of bonus giving during that year, but nevertheless some and it was very targeted, coming at times when originations were waning.

At least that's how it appeared to me.

That's called trying to keep originations UP to at least $2m/mo and barely succeeding, not trying to keep them flat down at $2m/mo.

Ken means that, if they wanted, Prosper could have been giving out promotion bonuses all the time like Lending Club, hence artifically increasing their origination numbers, but instead they strategically chose not to, rather only giving out promotions when the average origination numbers began to dip below 2 million a month. Rather than increased borrower volume, they instead want to first demonstrate that their model can be financially successful, especially after the abysmal performance of the first several years.

In fact, his argument does have some merit, especially considering that Prosper loans originated in 2009 and 2010 have a MUCH higher ROI than Lending Club loans originated in the same time frame. It of course remains to be seen if they can retain such a high ROI with an increased borrower volume.