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Chinese billionaire Chen's Shanda buys 11.7 percent of LendingClub
May 23, 2016 / 1:21 PM / in a year

Chinese billionaire Chen's Shanda buys 11.7 percent of LendingClub

A woman looks at her phone as she passes by a Lending Club banner on the facade of the the New York Stock Exchange December 11, 2014.Brendan McDermid/File Photo

(Reuters) - Chinese billionaire Chen Tianqiao has bought a nearly 12 percent stake in LendingClub Corp (LC.N) as the largest U.S. marketplace lender seeks funding after a botched sale of loans spooked some of its biggest investors.

Singapore-based private investment firm Shanda Group, which is led by Chen, said on Monday that it saw the online lender's battered stock as an attractive buying opportunity.

It has been actively investing in the stock every week since at least late March, though the bulk of its purchases came since the May 9 announcement of Chief Executive Officer Renaud Laplanche's resignation, according to a securities filing.

LendingClub shares have tumbled 39 percent since Laplanche left after an internal investigation found the company had knowingly sold $22 million of loans that the buyer did not want.

The stock jumped 8.3 percent on Monday after Shanda unveiled its stake.

Chen made a name for himself as an online gaming magnate after launching Shanda Interactive with just $60,000 in the late 1990s. The business lured millions of Chinese to packed internet cafes across the country to play fantasy games, with media dubbing him China's answer to Bill Gates and booming sales putting him at the top of China's rich list in 2005.

Shanda Games listed on the Nasdaq in 2004 and delisted about a decade later, while the group has now ventured into internet finance and mobile payments, private equity and real estate investments, including forestry assets in the United States and Canada and commercial property in China.

The purchase of the 11.7 percent stake comes as growth in LendingClub's loan originations is slowing and regulatory interest in the sector is increasing.

The U.S. Treasury called this month for greater scrutiny of online lending, and the New York Department of Financial Services is probing LendingClub's business practices, according to a source familiar with the matter.

San Francisco-based LendingClub has hired Jefferies LLC to find investors to finance the loans and has reached out to several private equity and investment funds..

"We have been in discussions with Shanda regarding their investment, and we look forward to a continued dialogue with them," a LendingClub spokesman said.

LendingClub is by far the largest of the marketplace lenders, which sell their consumer and small-business loans on to investors.

Shanda Group said in a statement that it was a "strong believer" in the business model that LendingClub has pioneered and was "positive on its long-term prospects as it continues to evolve and refine its business."

The company bought a total of about 29 million LendingClub shares for $148.7 million. It also has call options to buy 15.7 million shares for $11.2 million and put options to sell 9.3 million shares, with all options expiring on June 17, according to the filing.

The investment comes as China's government said it approved a plan earlier this month to clean up the country's online financial sector, including the activities of marketplace lenders..

Shanda has invested in other U.S. financial services companies. In April, it bought a 10 percent stake in asset manager Legg Mason Inc (LM.N) from activist fund Trian Fund Management LP.

Reporting by Sudarshan Varadhan in Bengaluru and Olivia Oran in New York; Additional reporting by Elzio Barreto in Hong Kong; Editing by Lisa Von Ahn and Muralikumar Anantharaman

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