Upstart Lends Money It Doesn't Hold. What Does That Do to the Stock in a Downturn?
Lending is a tricky business. Interest income from payments may look stellar for years, but if just a small portion of these loan recipients stops paying, profits can be wiped away. A peculiar business in the lending "supply chain" is Upstart Holdings (NASDAQ: UPST) . The pandemic-era stock market darling uses artificial intelligence ( AI ) to price personal and auto loans before selling them to third parties. It is the middleman that tries to run with an asset-light balance sheet compared to banks, mitigating payback risks. But what happens if the lending markets freeze during a downturn? The answer could get quite scary. Here's why. Continue reading