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Banking industry

LendingTree's Unwavering Faith in Marketplace Business Model

Strategic Insights

— 1 min read

As LendingTree Inc.'s initial public offering (IPO) approached in February 1999, the company's CEO, Doug Lebda, faced a challenging market environment. The Federal Reserve's interest rate hikes had sent shockwaves through the industry, and similar companies were struggling to stay afloat. However, Lebda remained confident in LendingTree's marketplace business model, which had delivered remarkable results. The company's gross margins had soared to 61% in the nine months ending September 1999, a significant improvement from 7% in the same period the previous year.

Key Takeaways:

  • LendingTree's marketplace business model delivered impressive results, with gross margins increasing to 61% for the nine months ending September 1999, up from 7% in the same period in 1998.
  • The company's CEO, Doug Lebda, maintained unwavering faith in the marketplace business model, citing its unique value proposition in the lending industry.
  • LendingTree's unique model was identified by Internet analyst Henry Blodget and specialty finance analyst Michael Hughes as a key differentiator.
  • The company's IPO filing on December 1, 1999, coincided with a downturn in the mortgage industry, but LendingTree was able to differentiate itself and attract investors.
  • LendingTree's strategic investment in LoanTrader Inc. helped to complete the company's lending puzzle and further validated its marketplace business model.
  • The company's stock price closed its first day of trading at 18, after pricing at 12, and was trading at 12 at press time.

Statistics:

  • Gross margins: 61% (nine months ending September 1999) vs. 7% (same period in 1998)
  • IPO price: 12
  • Opening stock price: 16
  • Closing stock price on the first day of trading: 18
  • Investment in LoanTrader Inc.: $50 million (initial investment)
  • IPO filing date: December 1, 1999

Sources:

  • "LendingTree CEO Cites the Need for Internet Specialization," by Deborah Roth, Xconomy, February 1999
  • "LendingTree Files for $50 Million Initial Public Offering," by Bloomberg, December 1, 1999
  • "LendingTree's Onshore Operations," by LendingTree press release, July 1998

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