Shares soar as E-Loan reels in cash
The online lending company rockets 130 percent after Charles Schwab and a group of venture capital firms pump $40 million in cash into the company.
Venture capital firms Benchmark Capital, FT Ventures, Technology Partners and Abbey National joined Schwab in taking equity stakes. Schwab, Abbey and FT Ventures contributed $10 million each, while Benchmark and Technology Partners contributed $5 million each.
E-Loan also agreed to provide mortgage services to Schwab customers at the online broker's Web site.
"This really is a powerful one-two punch," said Tim Butler, an analyst at Pacific Crest Securities. "It kind of re-ignites the interest in the E-Loan story, which had been seriously waning since its stock fell below its IPO price."
E-Loan gained $5.28, or 130 percent, to close at $9.34. The stock has hit a high of $74.37 and a low of $3 during the past 52 weeks.
E-Loan, which offers consumer loans and online debt management services, said it will use the proceeds as working capital and for general corporate purposes. Butler said the cash infusion is necessary because the company was rapidly running out of capital at its current cash burn rate.
Each investment agreement is subject to E-Loan shareholder approval.
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The partnership agreement will allow E-Loan to expand the distribution of its loan services, potentially reaching Schwab's more than 7 million customers, analysts said.
The deal is similar to the one signed by rival LendingTree.com last fall. At the time, LendingTree got a cash infusion of about $50 million from GE Capital, Goldman Sachs, Priceline.com and several other investors. LendingTree products are available through Priceline's name-your-own-price loan services.
"We are going to see more partnership agreements like this, rather than financial companies developing in-house capabilities," Butler said.