What’s going on with Upstart stock

The stock market was pretty bleak on Wednesday, but Upstart was soaring among other falling stocks. The Dow Jones Industrial Average (^DJI) was on track for its worst one-day drop since 2020, and the S&P 500 (^GSPC) had fallen by 4% as of the market close.

Upstart Holdings (NASDAQ:UPST), on the other hand, was a significant outperformer in contrast to the overall market, with shares increasing by around 6%.

Why we care

Upstart’s stock price has plummeted by more than 50% in recent weeks. The leading cause was that the amount of loans handled on Upstart’s balance sheet has more than doubled. Investors took this as a major risk factor. However, the firm defended it as part of its business model as it introduces new sorts of loans.

Upstart’s management has now made it clear that it recognizes investors’ worries and that it will do something about them right away. CFO Sanjay Datta stated that the firm will restrict its balance sheet exposure to research and development loans only.  Furthermore, they will maintain the restrictions even if doing so means limiting lending volume during volatile credit markets.

Many of Upstart’s loans were on its balance sheet in the first quarter because it couldn’t find bank partners to buy them. Upstart will retain a modest amount of loans as proof of concept to roll out new services, like automobile loans.

Upstart also announced that Sharonview Federal Credit Union has partnered with Upstart Holdings on personal loans. Thus, making it the latest financial institution to do so.

What now

The company’s promise to decrease its credit risk on the balance sheet has certainly resonated with investors, who have nearly doubled their stock price since the post-earnings low over the previous few days. However, it’s worth noting that Upstart is still roughly 88% below its all-time high; while investors appear relieved to hear this, there’s still a long road ahead.

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