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United States securities and exchange commission logo
May 27, 2020
Dave Girouard
Chief Executive Officer
Upstart Holdings, Inc.
2950 S. Delaware Street, Suite 300
San Mateo, CA 94403
Re: Upstart Holdings,
Inc.
Amendment No. 1 to
Draft Registration Statement on Form S-1
Submitted May 13,
2020
CIK No. 0001647639
Dear Mr. Girouard:
We have reviewed your amended draft registration statement and
have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments. Unless we note otherwise, our references to prior comments are
to comments in our
March 30, 2020 letter.
Amendment No. 1 to Draft Registration Statement on Form S-1
Prospectus Summary
Overview, page 1
1. We note your response
to comment 3. Please disclose here a summary of the material
terms of your
agreements with your bank partners, including that the agreements are non-
exclusive, have initial
terms ranging from one to three years, are subject to certain early
termination provisions
and do not include any minimum origination obligation or
origination limits, and
disclose here that the expiration date of your agreement with Cross
River Bank, which began
on January 1, 2019, has an initial four year term with a renewal
provision for an
additional two years following the initial four year term. In addition,
Dave Girouard
Upstart Holdings, Inc.
May 27, 2020
Page 2
please briefly describe the "relationships" you have with your 70
institutional investors,
including clarification as to whether you currently have agreements
with 70 institutional
investors regarding the purchase of whole loans originated via your
platform, pass-
through certificates, or asset-backed securities that include
interests in Upstart-powered
loans.
2. We note your response to comment 7 that your disclosure regarding your
realized loss
rates for pools of securitized loans as compared to those predicted by
Kroll is intended to
demonstrate the predictiveness of your proprietary AI model. Please
disclose the loss
rates predicted by your AI model for pools of securitized loans as
compared to those
predicted by Kroll, and compare these predicted loss rates to the
realized loss rates. In
addition, we note your revised disclosure that you "regularly monitor
the accuracy of
[y]our AI models in comparison with simple credit score-based models
and have observed
higher model accuracy across a variety of statistical measures
relating to each model's
predictive accuracy." Please disclose quantitative information
regarding the results of
such comparisons.
3. We note your response to comment 8. Please provide a brief summary of
the roles of your
warehouse trust special purpose entities and your warehouse credit
facilities, including
outstanding balance information. Alternatively, please tell us why you
believe your
warehouse trust special purpose entities and warehouse credit
facilities are immaterial to
your business. In this regard, we note your disclosure on pages 46 and
100 that through
your warehouse trust special purpose entities you have entered into
warehouse credit
facilities and that, as of December 31, 2019, your warehouse credit
facilities had an
aggregate credit limit of $252.0 million, which can be used to fund
purchases of personal
whole loans originated by your bank partners or your platform, and
that, as of December
31, 2019, you had borrowed an aggregate of $79.1 million under the
warehouse facilities
with $126.3 million of the fair value of the loans purchased pledged
as collateral.
Our Ecosystem
Value Proposition to Bank Partners, page 7
4. We note your response to comment 9 that you added to disclosure in your
Industry,
Market and Other Data section on page 75 to explain the Net Promoter
Scores on page 7.
Please revise your disclosure on page 7 to disclose whether the 80 rate
is the average of all
your bank partners, and clarify, if true, that the scores of the
published benchmarks of
other banks may not be comparable to the Net Promoter Scores you
disclose because the
other banks did not use the same rating system that your bank partners
used. In addition,
FirstName LastNameDave Girouard
please describe on page 7 how you determined "the hypothetical loss
rates and approval
Comapany NameUpstart Holdings, Inc. to determine that your model could enable
banks to
rates of your funded borrower base
May 27, 2020 Page 2 by almost 75%."
lower loss rates
FirstName LastName
Dave Girouard
FirstName LastNameDave Girouard
Upstart Holdings, Inc.
Comapany NameUpstart Holdings, Inc.
May 27, 2020
Page 3
May 27, 2020 Page 3
FirstName LastName
In connection with our loan funding programs, we make representations and
warranties
concerning the loans sold, page 36
5. We note your response to comment 12, as well as your revised
disclosure that "only a
small number of Upstart-powered loans have been historically
repurchased." Please
further revise the disclosure to quantify the historical repurchase
rate (e.g., less than X%).
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 86
6. We note your response to comment 14 and that you do not believe
disclosure of average
borrower acquisition cost per loan is necessary because such
information can be derived
from the annual disclosures. Due to the significance of this metric,
please revise to
disclose your average borrower acquisition cost per loan for each
period presented along
with a discussion and analysis of the key drivers of any significant
period-to-period
trends.
7. We note your response to comment 16 and your revised disclosure on
page 88, including
the contribution margin on average for the fourth quarter of 2019.
Please revise to
disclose the contribution margin on average per loan for all periods
presented along with a
discussion and analysis of the key drivers of any significant
period-to-period trends.
Our Economic Model, page 87
8. We note your response to comment 18 that the Company does not charge
borrowers any
transaction fees for its loan matching services on its platform and
your revised disclosure
on page 88. Please further enhance your disclosure to clarify, if
true, that the Company
only charges these fees to bank partners and does not charge borrowers
any similar fees
for the loan matching services on your platform.
Interest Income and Fair Value Adjustments, Net, page 94
9. Please present interest income, interest expense and net fair value
adjustments separately
in this MD&A section. Please provide a discussion and analysis of each
item separately
and specifically explain the underlying reasons for fair value
declines.
Consumer Marketing, page 125
10. We note your response to comment 23. Please revise your disclosure on
page 125 to
clarify that other than through Credit Karma, the Company does not
consider any other
consumer marketing channel to be significant vis- -vis the other
channels.
Institutional Investors, page 127
11. We note your response to comment 25 and that 72% of loans funded
through your
platform were purchased by institutional investors through your loan
funding programs.
Dave Girouard
Upstart Holdings, Inc.
May 27, 2020
Page 4
Please revise to discuss the significant types of funding programs
used, explain the key
differences between each and explain the advantages of each type.
12. Please quantify, preferably in a tabular format, the amount of loans
funded by each type of
program for each period presented and discuss the key drivers of any
significant trends.
General, page F-1
13. Please update your financial statements in your next amendment, and
related disclosures
throughout the filing, as necessary, to comply with Rule 8-08 of
Regulation S-X.
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 15. Related Party Transactions, page F-57
14. We note your disclosure on pages 162 and 163 describing your related
party transactions
with Stone Ridge, Third Point and their affiliated entities. Please
revise your footnote
disclosure to provide an enhanced description of each of these
relationships, including the
nature and terms of these related party transactions and the related
dollar amounts for each
period presented. Please ensure that a reader can bridge the gap
between the footnote
disclosure, the related party disclosures on the face of the financial
statements and the
aforementioned disclosures on pages 162 and 163. Refer to ASC
850-10-50 for guidance.
15. Please revise your financial statements to separately disclose all
material related party
amounts on the face your balance sheet, income statement and statement
of cash flows for
all periods presented. Refer to Item 4-08(k) of Regulation S-X and ASC
235-10-S99-
1(k). In preparing these disclosures, please ensure that the amounts
disclosed can be
reconciled to the enhanced footnote disclosures in Note 15.
You may contact Ben Phippen at 202-551-3697 or Michael Volley at
202-551-3437 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Sonia Bednarowski at 202-551-3666 or Dietrich King at 202-551-8071 with
any other
questions.
FirstName LastNameDave Girouard Sincerely,
Comapany NameUpstart Holdings, Inc.
Division of
Corporation Finance
May 27, 2020 Page 4 Office of
Finance
FirstName LastName