'We're Ready': OnDeck CEO on Going Public, Working with Banks

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Noah Breslow sounded like he was on his sixth cup of coffee when he called Wednesday to discuss the initial public offering of his online small business lending platform, OnDeck Capital.

Breslow, nearly breathless, called the IPO "amazing," and "watershed moment" for the industry when considered in conjunction with LendingClub's smash IPO last week.

The IPO exceeded expectations, pricing at $20 per share after underwriters set a target range of $16 to $18. The company's stock hit a high of $28 per share in its first full day of trading Wednesday — a 40% increase — before ending the session at $27.98 and dropping slightly lower in afterhours trading.

The jump in stock value meant that the company ended up valued around $1.8 billion.

Despite the influx of cash, and with it greater investor scrutiny, Breslow said he didn't anticipate OnDeck changing the way it operates to accommodate raised expectations. "We've been operating with the discipline of a public business," he said, citing simulated earnings calls and other public company-like activities as evidence. "We feel like we're ready after eight years" of operating, Breslow continued.

OnDeck plans to essentially continue to double down on small business lending, a sector online marketplace lenders and investors consider to have substantial growth potential, rather than seek to diversify into consumer, auto, or other types of lending. Breslow called OnDeck's in-house small business credit scoring system "our core competency," adding that he viewed it less as competition to the banking industry and more as a complement. OnDeck already partners with BBVA and Bank of Montreal Harris on loan origination. The company is in talks to partner with more banks, but wouldn't say which ones.

The end of the IPO quiet period was also OnDeck's first chance to formally respond to a less-than-flattering profile of the company that appeared last month in Bloomberg Businessweek. The profile claimed that some of the lender's true interest rates soared above 100% when factoring in broker and transaction fees, and that some of the third-party brokers OnDeck uses do not operate in good faith.

When asked about the article, and the potential regulatory attention that could follow more stories like it, Breslow responded that the article "took a few very outlier examples and linked them to our IPO." The company is regulated in the same manner as an equipment leasing company, he said, suggesting a clampdown would be politically unpopular. "Both sides of the aisle want to see economic development."

Breslow also cited the results of a study that OnDeck commissioned Analysis Group, a consulting firm, to perform. The study concluded that OnDeck's first $1 billion in loans assisted $3.4 billion in "business activity" and aided the creation of 22,000 jobs.

But the number on investors' mind Wednesday was more likely OnDeck's year-over-year loan origination growth of 171% in the first three quarters of this year.

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