NEW YORK (TheStreet) -- LendingClub(LC) - Get Report stock is down 11.93% to $3.47 in early-morning trading on Tuesday after revealing a Justice Department investigation and possible shift in its strategy.
The online lender disclosed on Monday that it has received a grand jury subpoena issued by the Justice Department, the Wall Street Journal reports. LendingClub will cooperate with the SEC and Justice Department during the investigation.
Last week CEO Renaud Laplanche resigned following his failure to report loan-sale errors, which could prompt LendingClub to alter its business model, the Journal adds. The company "likely may need" to rely on its own balance sheet to fund its loans if it is unable to convince investors to continue buying, LendingClub said in a quarterly filing.
So far, LendingClub has sold all the loans it originated to investors rather than holding them like traditional banks and lenders do.
The company also is considering offering equity to lure new loan buyers, and might need to reduce new loan originations, which could weigh on earnings.
Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D-.
LendingClub's weaknesses include its generally disappointing historical performance in the stock itself and poor profit margins.
You can view the full analysis from the report here: LC
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.