Lending Club dealt another blow to the Bay Area’s efforts to hold on to its middle class when the fintech said Wednesday that it plans to move 350 jobs from San Francisco to a new office in Utah by year-end.
“We plan to wind down customer-support operations in S.F. and move that division to Lehi, Utah,” Lending Club spokesman Anuj Nayar told the San Francisco Business Times Wednesday. The company currently employs a little more than 1,700 people at its Market Street headquarters in San Francisco.
The company’s reason for shifting jobs to Utah will have a familiar ring: Rents are too high in the city to devote space to customer-support positions.
In a memo to employees, Lending Club CEO Scott Sanborn said that rents in San Francisco have increased 140 percent since 2010 and are now “some of the highest in the country,” according to Bloomberg News. “Growing exclusively in San Francisco simply doesn’t make financial sense. Instead, we now have plenty of headroom to grow affordably in Lehi and access a new talent base in Utah.
“This is one of those messages that, while I know it’s the right thing for the company, is tough to deliver,” Sanborn said in the memo. It means that “virtually all operations positions, including those supporting auto, will eventually no longer exist in San Francisco.”
Lending Club also told the Business Times Wednesday that it’s already making progress in reducing the space it uses in San Francisco, where the company’s headquarters will remain.
“By the end of this year, we will have reduced our S.F. footprint by 41 percent through a combination of lease expirations and subleasing floors, and we will grow in Lehi from zero to 70,000 square feet with more than 350 ‘LCers’ located there,” Lending Club’s Nayar said. “This move enhances our service to our members, provides business continuity, and lowers costs across the company. Operating improvements like this are part of our broader initiative to review revenue opportunities as we drive towards profitability.”
Asked how many employees might lose their jobs if they’re not willing to move to Utah, Nayar said: “This was an early notification to our employees. Nothing is happening right now and no jobs are being eliminated as of today.
“We will circle back to the teams with official notice, including separation dates, on or around July 1, providing a minimum of 60 days’ notice.
“That means the earliest separation dates wouldn’t be until the very end of August or beginning of September. We’re 100 percent committed to doing the right thing for everyone affected,” Nayar said. “We’re providing the option to employees in good standing to relocate to Lehi with company assistance, apply for other open roles within the company, or eventually receive a transition package that includes severance and outplacement assistance.”
Lending Club unveiled its new Utah office, near Salt Lake City, on April 26. The company received tax incentives of up to $4.486 million from the state of Utah to invest $17.85 million in a 130,000-square-foot operation that will eventually create 860 jobs, according to the Economic Development Corp. of Utah.
“As we continue our growth and increase our focus on operating efficiency and resiliency, it is clearly time for us to expand beyond our San Francisco headquarters,” Lending Club’s Sanborn is quoted as saying on the state of Utah’s economic-development website.
Lending Club’s shares have been languishing on Wall Street, where the stock traded at the $3.20 level on Wednesday. The company went public in late 2014 at $15 per share and at one point changed hands for almost $30.
In May 2016, a cloud was cast over Lending Club’s operations when the company founder and then-CEO Renaud Laplanche exited the company amid questions about the accuracy of some of its loan documents and whether certain loans met the terms it agreed to with its investors. Lending Club and Laplanche have sought to put those troubles in the rear-view mirror.
But at the company’s June 5 annual meeting, Lending Club will ask shareholders to approve a 5-for-1 reverse stock split, which will help reduce the fintech’s listing fees and broaden the pool of institutional shareholders that might consider investing in the company. Most institutional investors steer clear of low-priced stocks.
Lending Club’s lesson on the economics of doing business in San Francisco follows Charles Schwab (NYSE: SCHW) over the years moving thousands of jobs out of San Francisco to lower-cost markets in Texas, Colorado and elsewhere. When JPMorgan Chase (NYSE: JPM) bought the failed Washington Mutual in 2008, one of the first moves the big bank made was to move the smaller bank’s back-office credit card operations out of the East Bay.
More Bay Area jobs could be heading to Utah if HealthEquity (NASDAQ: HQY), based near Salt Lake City, follows through on its buyout offer for San Mateo-based WageWorks (NYSE: WAGE).