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[Beerbud1]

So how long does 17.2 million last?

12-18 months

[ira01]

So how long does 17.2 million last?

12-18 months

Assuming the class action doesn't settle or go to judgment within that time.   There's a reasonable chance that the class action will eventually cost Prosper (and the individual directors and perhaps its insurer) an eight figure sum.

[God-Father]

Ira

I presume you believe the class action will go against Prosper.

Do you think there is a reasonable chance the class action will be settled in the next 12-18 months?  If so, do you think the insurance company will have to cover the judgement?

[ira01]

Do you think there is a reasonable chance the class action will be settled in the next 12-18 months? 

Yes.  And if it doesn't settle, there is a reasonable chance of a trial concluding within that timeframe.  Of course, if there is a trial any judgment won't be final during that timeframe, as an appeal would probably take more than a year itself. 

It is in Prosper's interest to settle, as is the case in pretty much any non-frivolous class action, because the potential damages from a trial are ruinous.  Prosper's worst case scenario is that it could be ordered to repurchase every defaulted P1.0 loan, and pay interest on that money to lenders as well.  Aren't net defaults around $40M?  So that could be a $50M hit, which would almost certainly bankrupt Prosper (unless its insurer and/or the individual defendants had to pay most of that). 

If so, do you think the insurance company will have to cover the judgement?

I have no idea.  Certainly Prosper's victory over its insurer in the coverage dispute is a good sign for Prosper, but it really doesn't answer the question, because an insurer's duty to defend is much broader than its duty to indemnify (i.e., pay the judgment).  How the insurer sees the answer to that question will determine how much money it kicks in towards a settlement.  Another interesting dynamic is the diverging interests between Prosper and its Officers/Directors who are individual defendants.  The latter (especially people like Chris Larsen, who were likely the hands-on people making the decision to illegally sell unregistered securities (per the SEC)) will presumably strongly want Prosper to settle, eliminating the possibility that they will personally wind up on the hook for paying 8-figure judgments, while Prosper itself may decide it is better to roll the dice. 

[Urbi_et_Orbi]

Here is the pertinent 8-K filing.

http://sec.gov/Archives/edgar/data/1416265/000141626511000414/p8k6d7d2011.htm

Item 1.01. Entry into a Material Definitive Agreement.
On June 3, 2011, Prosper Marketplace, Inc. (“Prosper”) entered into a Stock Purchase Agreement (the “Purchase Agreement”) with certain new investors and certain of its existing investors (each, a “Share Purchaser” and, collectively, the “Share Purchasers”), pursuant to which, Prosper issued and sold to such Share Purchasers (either directly or through certain of their respective affiliates) 23,222,747 shares of the Company’s Series E Preferred Stock (the “Shares”) for an aggregate purchase price of $17.15 million.  The Share Purchasers included: Draper Fisher Jurvetson, Crosslink Capital, Accel Partners, Agilus Ventures and TomorrowVentures 2010 Fund, LLC.

Prior to entering into the Purchase Agreement, there was no material relationship between Prosper and any of the Share Purchasers except to the extent that certain of the Share Purchasers participated in Prosper’s previous equity and debt financings. In addition, each of the following members of Prosper’s Board of Directors was or is affiliated with one of the Share Purchasers: James W. Breyer is a partner of Accel Ventures; Lawrence W. Cheng is the managing partner of Volition Capital, LLC, which manages the existing U.S. portfolio of Agilus Ventures; and Gary B. Coursey, Jr. is the managing member of Tomorrow Ventures LLC, which is the managing member of TomorrowVentures 2010 Fund, LLC.

Item 3.02 Unregistered Sales of Equity Securities.   
The information set forth in Item 1.01 is hereby incorporated by reference. In connection with the sale of the Shares, the Company retained Victory Park Securities LLC to act as the Company’s financial advisor and placement agent.  As consideration for providing these  services, the Company will be paying Victory Park Securities LLC a fee of $375,000.  The Shares were sold in reliance on Section 4(2) of the Securities Act of 1933, which exempts from registration sales by an issuer not involving any public offering.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
The information set forth in Item 1.01 is hereby incorporated by reference.  In connection with entering into the Purchase Agreement, Timothy C. Draper, who is a Managing Director of Draper Fisher Jurvetson, and Jerome Contro, who is a General Partner and the Chief Operating Officer of Crosslink Capital, were elected to serve on Prosper’s Board of Directors as of June 3, 2011.

[JGuide]

I'm convinced that Prosper has learned from it's mistakes (at least most of them) and now they have a great lending model.

(because lenders are actually earning money).

kenL,

   I am not sure I agree that Prosper has a great lending model - better but not great.

  Seems many of the listings on the 'rebate' page are destined for default. I think there may be some disillusionment coming.  I think better collections could solve some of that, as could reformatting groups and bringing back group rewards (but that is a different topic for another time).

  If I had any say I would work to increase in house collections and I simply would not sell defaulted loans ever.  Simply attack them aggressively, perhaps even starting a fund for BK fraud pursuit?

  By the way - the tools you wrote help my return tremendously! Thanx again!!!

Cheers,
  JGuide

[Your_Bank]

Wow, you guys are still going at it.  I think this round of financing is great for Prospers future.  I haven't lent in a while, but I have been happy with my results after putting ~$35,000 into their notes.  I'll  post an update on my portfolio soon.

[God-Father]

Wow, you guys are still going at it.  I think this round of financing is great for Prospers future.  I haven't lent in a while, but I have been happy with my results after putting ~$35,000 into their notes.  I'll  post an update on my portfolio soon.

Here you go