PROSPER FUNDING LLC PROSPER MARKETPLACE, INC. 2020. 9. 16.آ  PROSPER FUNDING LLC $1,000,000,000...

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Transcript of PROSPER FUNDING LLC PROSPER MARKETPLACE, INC. 2020. 9. 16.آ  PROSPER FUNDING LLC $1,000,000,000...

  • Filed pursuant to Rule 424(b)(3) Registration Nos. 333-225797 and 333-225797-01

    PROSPER FUNDING LLC $1,000,000,000 Borrower Payment Dependent Notes

    PROSPER MARKETPLACE, INC. PMI Management Rights

    This is a public offering to investors of Prosper Funding LLC of up to $1,000,000,000 in principal amount of Borrower Payment Dependent Notes, or “Notes.” Each Note will come attached with a PMI Management Right issued by Prosper Marketplace, Inc. Prosper Funding LLC will be the sole issuer of the Notes and Prosper Marketplace, Inc. will be the sole issuer of the PMI Management Rights. For the purposes of this prospectus, the Notes and the PMI Management Rights will be collectively referred to as the “Securities.”

    Except as the context requires otherwise, as used in this prospectus, “we,” “us,” “our,” and “Registrants” refer to Prosper Marketplace, Inc. (“PMI”), a Delaware corporation, and its wholly owned subsidiary, Prosper Funding LLC (“PFL”), a Delaware limited liability company; and “Prosper” refers to PMI and its wholly owned subsidiaries, PFL, BillGuard, Inc., a Delaware corporation, Prosper Healthcare Lending LLC, a Delaware limited liability company, Prosper Warehouse I Trust, a Delaware statutory trust, Prosper Warehouse II Trust, a Delaware statutory trust, Prosper Marketplace Issuance Trust, Series 2019-1, a Delaware statutory trust, Prosper Marketplace Issuance Trust, Series 2019-2, a Delaware statutory trust, and Prosper Marketplace Issuance Trust, Series 2019-4, a Delaware statutory trust, on a consolidated basis. In addition, the unsecured, consumer loans originated through our marketplace are referred to as “Borrower Loans.”

    Payments for each series of Notes will be dependent on payments PFL receives on a specific Borrower Loan described in a listing posted to our marketplace. All listings on our marketplace are posted by individual consumer borrowers of PFL requesting individual consumer loans. In addition, each listing will be described in a prospectus supplement.

    Important terms of the Notes include the following, each of which is described in detail in this prospectus:

    • The Notes are special, limited obligations of PFL only and are not obligations of its parent company, PMI or of the borrowers under the corresponding Borrower Loans.

    • PFL’s obligation to make payments on a Note will be limited to an amount equal to the Note holder’s pro rata share of amounts PFL receives with respect to the corresponding borrower loan, net of any servicing fees and other costs and fees, if applicable. Neither Prosper Funding LLC nor Prosper Marketplace, Inc. guarantees payment of the Notes or the corresponding Borrower Loans.

    • The Notes will bear interest from the date of issuance, have a fixed rate, be payable monthly and have an initial maturity of three or five years from issuance. PFL may add additional Note terms from time to time.

    • A Note holder’s recourse will be extremely limited in the event that borrower information is inaccurate for any reason.

    Important terms of the PMI Management Rights include the following, each of which is described in detail in this prospectus:

    • The PMI Management Rights will not be separable from the Notes offered on the marketplace and will not be assigned a value separate from the Notes.

    • The PMI Management Rights are “investment contracts” issued by PMI directly to Note holders. The phrase “investment contract” is a concept under federal securities law that refers to an arrangement where investors

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  • invest money in a common enterprise with the expectation of profits, primarily from the efforts of others. Here, the “investment contracts” that PMI is registering as PMI Management Rights arise from the services that PMI has provided and will provide, as described in the Administration Agreement, the Indenture, the Investor Registration Agreement (each as described in more detail below), and in this prospectus, which services include, but are not limited to:

    ◦ the existence and operation of the marketplace; ◦ verification of borrower information; ◦ evaluation and validation of the Prosper Score and Prosper Rating; ◦ remitting borrower payments; and ◦ collecting on delinquent accounts.

    • Investors who purchase PMI Management Rights will have rights under the federal securities laws as purchasers of a registered security. Investors will have limited contractual rights, collectively through the Indenture trustee, to enforce PMI’s contractual obligations under the Administration Agreement. Such contractual rights exist under state law and will not, in any way, affect the rights of investors under the federal securities laws.

    • PMI’s obligations to provide services under the Administration Agreement may be terminated by PMI or by PFL under certain circumstances described in this prospectus. For more information, see “Summary of Indenture, Form of Notes, PMI Management Rights and Administration Agreement-Administration Agreement- Indenture Trustee as Third-Party Beneficiary.” Termination of the Administration Agreement would not affect the rights of holders of previously-issued PMI Management Rights under the federal securities laws.

    PFL will offer the Notes to its investors at 100% of their principal amount.

    The Notes and PMI Management Rights will be issued in electronic form only and will not be listed on any securities exchange. Notes and PMI Management Rights may only be transferred through an approved online trading platform. Currently, no trading platform exists for the transfer of the Notes and PMI Management Rights and there can be no assurance a trading platform for the transfer of Notes and PMI Management Rights will develop in the future. Therefore, Note purchasers must be prepared to hold their Notes and PMI Management Rights to maturity. For more information, see “Risk Factors—Risks Inherent in Investing in the Notes—The Notes will not be listed on any securities exchange and can be held only by PFL’s investors. Further, no trading platform for the transfer of Notes exists and there can be no assurance a trading platform for the transfer of Notes will develop in the future. Therefore, investors should be prepared to hold the Notes they purchase until maturity.”

    This offering is highly speculative and the Notes involve a high degree of risk. Investing in the Notes should be considered only by persons who can afford the loss of their entire investment. See “Risk Factors” for more information.

    Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

    The date of this prospectus is September 16, 2020

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  • TABLE OF CONTENTS

    ABOUT THIS PROSPECTUS..................................................................................................................................... 4 WHERE YOU CAN FIND MORE INFORMATION................................................................................................. 4 PROSPECTUS SUMMARY........................................................................................................................................ 5 THE OFFERING.......................................................................................................................................................... 11 FORWARD-LOOKING STATEMENTS.................................................................................................................... 15 RISK FACTORS.......................................................................................................................................................... 17 RISKS RELATED TO BORROWER DEFAULT...................................................................................................... 17 RISKS INHERENT IN INVESTING IN THE NOTES.............................................................................................. 24 RISKS RELATED TO PFL AND PMI, OUR MARKETPLACE AND OUR ABILITY TO SERVICE THE NOTES......................................................................................................................................................................... 29 RISKS RELATED TO COMPLIANCE AND REGULATION.................................................................................. 38 USE OF PROCEEDS................................................................................................................................................... 44 PLAN OF DISTRIBUTION......................................................................................................................................... 44 FINANCIAL SUITABILITY REQUIREMENTS....................................................................................................... 45 ABOUT THE MARKETPLACE................................................................................................................................. 47 SUMMARY OF INDENTURE, FORM OF NOTES, PMI MANAGEMENT RIGHTS AND ADMINISTRATION AGREEMENT.......................................................................................................................... 82 MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS......................................................................... 96 INFORMATION ABOUT PROSPER FUNDING LLC.............................................................................................. 101 INFORMATION ABOUT PROSPER MARKETPLACE, INC..................................................................................