Upstart CEO Defends Loan Balance Increase, Says AI Lending Platform Model Hasn’t Changed

In an interview Tuesday with CNBC’s Jim Cramer, Upstart Holdings CEO David Girouard sought to downplay investor concerns about the increase in loan balances held on the fintech company’s balance sheet at the end of its term. first trimester.

Shares of the artificial intelligence lending platform plunged 56.42% on Tuesday, closing at $33.61 apiece, a day after it also downgraded its revenue and adjusted EBITDA margin outlook for the whole year. Upstart cited rising interest rates and broader economic uncertainty for the revised forecast, which was softer than Wall Street expectations. Upstart’s loan balance was also a focus on Tuesday.

“Just to be clear, in the first quarter, a single-digit percentage of loans originated on our platform came to our balance sheet,” Girouard said in a “Mad Money” interview. “That hasn’t changed in our history.”

On Monday, Upstart announced that it held $604.4 million in loans on its balance sheet, as of March 31, compared to $260.8 million in the fourth quarter of 2021. Some analysts noted that this increase increased exposure to the Upstart’s credit risk, and Cramer told Girouard he was “shocked” by the figure.

“We said we used loans on our balance sheet to test new products and new models, and that’s a lot of what those accounted for,” Girouard said.

Upstart has recently expanded into the auto loan market, while striving to roll out a low-cost loan product.

“It’s not a change in our model,” Girouard said, referring to Upstart’s use of its balance sheet to support research and development of new loan products. “Over 90% of our loans are issued and held by banks or issued by banks and sold forward to institutional markets. That has not changed.”

Upstart, which went public in December 2020, has been soaring for much of the past year and reached an all-time closing high of $390 per share on October 15. rob growth companies in response to a more hawkish Federal Reserve. As of Tuesday’s close, Upstart shares were down about 91% from their closing high.

Several Wall Street analysts downgraded Upstart shares on Tuesday. Cramer told Girouard he believed in part of Tuesday’s dramatic fall in stocks because investors realized there was “a lot more risk” than they previously thought.

“All other things being equal, I prefer [if] our stock was going up. But the fundamentals of our business haven’t changed,” said Girouard, a former Google executive who also founded Upstart. “Earnings and growth have been the combination since our IPO in December 2020 and since before that. We are proud of what we build.”

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