Prosper’s SEC Registration Declared Effective
Prosper Becomes First SEC Registered Auction-Based P2P Loans and Trading Platform;
Largest Peer-to-Peer Loans Marketplace Resumes Lending Activity
SAN FRANCISCO--(BUSINESS WIRE)--Prosper, a leading online destination for borrowing money and investing in personal loans, today announced the successful completion of its registration process with the Securities & Exchange Commission (SEC). As a result, America’s largest peer-to-peer (P2P) loans marketplace has resumed for borrowers nationwide and lenders in 14 states with others soon to follow.1 Prosper is the first Internet auction-based P2P loans platform to have its registration statement declared effective by the SEC – a move that marks a significant breakthrough for the P2P lending industry.
“With the financial system in crisis, P2P lending – Americans investing in fellow Americans and small businesses – is needed now more than ever”
Prosper’s SEC registration statement also covers the first Internet auction-based trading platform (sometimes referred to in financial circles as a “secondary market”), which makes it possible for Prosper lender members to sell their Prosper Notes to other individual and institutional investors. The note trading service is provided by Foliofn Investments, Inc., through their Folio Investing Note Trader platform.2
Prosper first introduced the concept of people-to-people lending in the U.S. when it launched in 2006. The goal was to create a platform where people could invest in each other in a way that was socially and financially rewarding. The concept quickly caught on. From the time Prosper launched up until the time it entered an SEC registration quiet period in October 2008, Prosper had grown to more than 800,000 members and facilitated approximately $180 million in personal loans, making Prosper the largest peer-to-peer loans marketplace in the world.
“With the financial system in crisis, P2P lending – Americans investing in fellow Americans and small businesses – is needed now more than ever,” said Chris Larsen, CEO and co-founder of Prosper. “It has been extremely frustrating to be on the sidelines in the teeth of a credit crunch. Nevertheless, we believe that completion of the SEC registration process for our auction-based model – a model that we believe is an extraordinarily powerful tool for fair price discovery for everyone involved in the transaction – is a major watershed for the industry.”
A competitive auction marketplace, combined with loan-level transparency and extensive credit and social data, allows Prosper lenders to fine-tune their bidding decisions. Prosper has enhanced its auction model to include a hard bid floor for each listing, which helps lenders appropriately price for risk while investing online. The bid floor for each listing is calculated by adding the national average certificate of deposit rate that matches the term of the borrower loan to the minimum estimated loss rate assigned to each listing.3 For example, an A-rated listing with a minimum estimated loss rate of 2.0% is added to a national average certificate of deposit rate of 2.27%, resulting in a bid floor of 4.27%.
In addition to the new bid floor, more layers of safety and vigilance have been added to the marketplace. Prosper has lowered its minimum bid requirement to $25 (previously $50), which should make it easier for smaller lenders in particular to diversify. Prosper has introduced Prosper Ratings – an improved credit grading system for loan listings – and now requires borrowers to meet the new minimum credit score requirement of 640 (previously 520). Prosper Ratings are based on the historical loan performance of 29,000 Prosper loans and are designed to better convey risk.
Prosper believes the new Prosper Rating system, combined with the new minimum 640 credit score requirement and enhanced auction model, will make analyzing risk simpler and more robust than ever. A review of historical returns since inception based on the improved risk rating and credit segmentation system determined Prosper lenders’ return on investment ranges from 7.19% for loans with a AA Prosper Rating to 4.59% for loans with an E Prosper Rating.4
Prosper Marketplace Inc. is a leading online destination for borrowing money and investing in loans. It pioneered direct peer-to-peer loans, which allow people to invest in each other in a way that is socially and financially rewarding. Additionally, Prosper’s auction model provides an open and transparent way to borrow or invest in consumer loans on terms that are favorable to everyone involved in the transaction. More than 800,000 people from across the country are part of the Prosper peer-to-peer lending community. Since launching in February 2006, approximately $180 million in loans have been funded in the marketplace.
Prosper was co-founded by Chris Larsen, co-founder of E-LOAN. Backed by Accel Partners, Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital, and Omidyar Network, Prosper has raised approximately $40 million in venture capital.
About Folio Investing
Folio Investing is an online brokerage that enables investors to manage stocks, ETFs, and mutual funds as integrated investment portfolios ("Folios") that deliver better control, greater transparency, and lower cost. Investors can create their own Folios, much like creating personalized ETFs or mutual funds, or invest in over 100 Ready-to-Go Folios representing market indices, sectors, geographical regions, target dates, and more. The Folio Unlimited Plan features unlimited commission-free trading in twice-daily windows for one low monthly fee. Ready-to-Go Folios can be managed or unmanaged and are offered by FOLIOfn Investments, Inc., a registered broker dealer, and are not registered investment companies. FOLIOfn Investments, Inc. does not provide investment, tax, or legal advice. FOLIOfn Investments, Inc., is a member of FINRA/SIPC. For more information, please visit www.folioinvesting.com
This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "would" and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements may include, among other things expected rates of return and interest rates; the anticipated success and attractiveness of Prosper's lending platform; and the benefits of Prosper's lending platform as compared to other existing alternatives in the marketplace. Although Prosper believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected and the past performance of Prosper loans is no guarantee of future results. For example, Prosper may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Prosper has included important factors in the cautionary statements included in the prospectus, particularly in the "Risk Factors" section, that could cause actual results or events to differ materially from forward-looking statements. Prosper does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
|Free Writing Prospectus|
|Filed pursuant to Rule 433|
|Registration Statement No. 333-147019|
|Dated July 14, 2009|
1 Prosper is currently available to lenders in California, Colorado, Delaware, Georgia, Illinois, Minnesota, Montana, Nevada, New York, South Carolina, South Dakota, Utah, Wisconsin, and Wyoming. Borrowing is permitted in the District of Columbia and all states except Iowa, Kansas, Maine, and North Dakota.
2 Folio Investing is registered trademark of Foliofn, Inc. Securities products and services offered through FOLIOfn Investments, Inc. Member FINRA/SIPC.
3 The national average certificate of deposit rate is a proxy for a risk free consumer rate and is published daily by BankRate.com. The national average certificate of deposit rate that matches the term of the borrower loan will be used. For a listing that results in a three year loan the three year national average certificate of deposit rate will be used. The risk free rate will be updated on the third business day of each month based on the certificate of deposit rate published on BankRate.com on the first business day of each month.
4 Return on investment as of June 30, 2009. Not FDIC-insured; Investments may lose value; No Prosper or bank guarantee. Prosper Notes are offered by prospectus.