Shares of LendingClub lost even more ground, adding to last week's 51 percent plunge, after news of a shareholder lawsuit. Bobbi Rebell reports.
LendingClub is facing even more troubles. After the stock plummeted 51 percent last week, now the company is facing a shareholder lawsuit in the first of what could be many federal lawsuits. The complaint: that the online lender inflated its share price by hiding its inability to monitor its operations. And when the truth came out, shares plunged. That lawsuit put new pressure on the stock on Tuesday. pushing it down more than ten percent. Lending Club is the largest of what are commonly referred to as marketplace lenders, which sell their consumer and small-business loans to investors. Last week's stock stomping was triggered after its CEO was ousted after an internal probe revealed the company had fasified documentation when selling a package of loans. And Monday, Lending Club received a subpoena as part of a probe by the Justice Department. Compass Point analyst Michael Tarkan writing quote: "We view the new Department of Justice (DOJ) investigation and commentary surrounding funding issues as clear negatives for LC, with funding pressure representing more near-term risk and potential regulatory developments emerging over the longer-term." Tarkan is maintaining a sell on the stock and lowered his target price to $3 from $4. LendingClub issued a statement saying that it is quote "not surprised to receive a Department of Justice subpoena in light of our public disclosures" adding that it is fully cooperating.