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SAN FRANCISCO — NextCard Inc., the nation’s largest online credit card issuer, disclosed Wednesday that federal regulators clamped down on its operations as its loan losses mount, prompting the company to put itself up for sale. 

The crackdown occurred after regulators conducting a routine exam concluded NextCard doesn’t have an adequate financial protection against the trouble brewing in its $2 billion loan portfolio. 

The regulators declared NextCard as “significantly undercapitalized” — a scarlet letter that freezes the company’s growth and means management won’t be able to make major decisions without government approval. 

Unable to raise the $140 million it would take to satisfy regulators, NextCard hired Goldman, Sachs & Co. to sell its credit card business, including 1.2 million accounts, to a “larger, more established financial institution.” 

Wednesday’s news devastated NextCard’s stock. The company’s shares plunged $4.48, or 84 percent, to close at 87 cents Wednesday on the Nasdaq Stock Exchange. The stock peaked at $53.12 in late 1999. 

As of Sept. 30, NextCard’s book value was about $185.9 million, or about $3.50 per share, based on estimates provided the company. NextCard’s management also believes the company’s online databases and insights accumulated over the past four years also will raise the sale price. 

The company collected more than $300 million from investors in its initial and secondary public offerings in 1999. NextCard’s market value stood at $46 million Wednesday. 

Investors have little confidence that the company will fetch much in an auction, partly because the depth of its loan problems remains murky, said industry analyst Meredith Whitney of Wachovia Securities. 

“Regulators did this in such a rash manner that things have to be pretty bad,” Whitney said. 

“Right now, there is just no confidence that this company knew how to underwrite loans.” 

Regulators are forcing NextCard to tighten its underwriting standards as part of the new restrictions on the company. 

The doubts shadowing NextCard are similar to those dogging Providian Financial Corp., a major credit card provider that recently jolted investors by revealing a number of problem loans to customers with troubled borrowing histories. 

NextCard CEO John Hashman spent 11 years in Providian’s management and the company’s chairman and founder, Jeremy Lent, formerly worked as Providian’s chief financial officer. 

Some of NextCard’s loan problems may be tied to its Internet business model. Analysts have long feared that NextCard’s promise to quickly issue credit cards on the Web would limit the company’s ability to screen out unworthy borrowers and fraudulent applications. 

As part of the bank exam, regulators forced NextCard to reclassify some of its previous fraud losses as loan losses. 

NextCard also continued to grow rapidly even as the economy deteriorated, doubling its customer base in the past year. 

“The Internet is a good way to service financial products, but it has yet to be proven that it is a good way to originate financial products,” Whitney said. 

Wednesday’s developments turned NextCard’s third-quarter earnings release into a footnote. The company reported a loss of $53.1 million, or $1 per share, for the three months ended Sept. 30, up from $20.3 million, or 38 cents per share, last year. 

In light of the regulatory actions, NextCard said it will stop providing forecasts about its future results. 

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On The Net: 

http://www.nextcard.com