Upstart CEO defends increasing loan balance, says AI lending platform model hasn’t changed

In an interview Tuesday with CNBC’s Jim Cramer, Equity investments born CEO David Girouard sought to downplay investor concerns about the rise in the loan balance held on the financial technology firm’s balance sheet at the end of its first quarter.

Stocks of the artificial intelligence lending platform was down 56.42% on Tuesday, closing at $ 33.61 each, one day after also lowering the full-year outlook for revenue and adjusted EBITDA margin. Upstart cited rising interest rates and wider economic uncertainty for the revised forecasts, which fell short of Wall Street expectations. Upstart’s loan balance was also in focus on Tuesday.

“Just to clarify, in the first quarter, a single digit percentage of the loans that originated on our platform came to our balance sheet,” Girouard said in an interview. “Crazy money.” “This hasn’t changed in our history.”

On Monday, Upstart reported holding loans worth $ 604.4 million in its balance sheet as of March 31, up from $ 260.8 million in the fourth quarter of 2021. Some analysts noted that the increase increases exposure. credit risk at Upstart and Cramer told Girouard he was “shocked” by the figure.

“We said that we use the insertion of loans in our balance sheet to test new products and new models, and that is largely what they represented,” Girouard said.

Upstart recently expanded into the auto loan market, while also working to launch a small dollar loan product.

“It’s not a change in our model,” Girouard said, referring to Upstart’s use of its budget to support research and development of new lending products. “More than 90% of our loans are originated and held by banks or originated by banks and sold forward to institutional markets. That hasn’t changed.”

Upstart, that went public in December 2020, skyrocketed for much of last year and hit an all-time closing high of $ 390 per share on October 18. 15. It has been difficult to skid since then, partly due to a wider shift away from high-growth companies in response to a more aggressive Federal Reserve. As of Tuesday’s close, Upstart shares were down roughly 91% from their closing record high.

On Tuesday, several Wall Street analysts downgraded Upstart shares. Cramer told Girouard he believed part of Tuesday’s dramatic stock drop because investors realized there was “a lot more risk” than they previously thought.

“All things being equal, I prefer [if] our stocks were going up. But the fundamentals of our business haven’t changed, “said Girouard, a former Google executive who also founded Upstart.” Profits and growth have been the combination since we went public in December 2020 and before. We are proud of what we are building “.

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