JD.com-backed micro lender slashes IPO by 70pc after China’s internet finance crackdown
Lexin Fintech revises its fundraising expectation from US$500 million to US$132 million
Lexin Fintech Holdings, a Chinese online micro lender backed by JD.com, sharply cut the amount it hoped to raise in a planned US initial public offering, after shares in its rivals declined broadly on the heels of a crackdown by Beijing on online consumer loan platforms.
Lexin Fintech, which targets consumers between the ages of 18 and 36, plans to offer 12 million American depositary shares at an indicative price range of US$9 to US$11 a share, raising as much as US$132 million, the company said in an updated filing on Thursday to the US Securities and Exchange Commission.
The fundraising value is sharply down from an originally planned US$500 million, as mentioned in the IPO prospectus issued last month.
The Shenzhen-based company has applied to list on Nasdaq under the symbol LX.
The move comes after the company’s rivals declined broadly in the United States market following tightened scrutiny of online consumer lending by China last month.
The Chinese government has warned recently about rising household debt and issued rules to regulate online financial activity, including suspending approvals for new internet micro loan companies countrywide.
Online micro credit provider Qudian, which launched the biggest US listing by a Chinese fintech company in October, has plunged in the past month, closing at US$13.98 on Wednesday night. That is down 42 per cent from its IPO price of US$24. Qudian is backed by Alibaba Group Holding, which owns the South China Morning Post.
Peer-to-peer online lender PPDAI Group, which debuted on the New York Stock Exchange on November 9, has also fallen a combined 35 per cent from its offer price of US$13, trading at US$8.5 on Wednesday night.
Shares in online loan provider China Rapid Finance have also been down 30 per cent since mid-November.
Lexin Fintech was founded in 2013, and by the end of September it had more than 6.5 million customers with an approved credit line and more than 20 million registered users, it said.
It offers personal loans and matches these with various funding sources, including individual investors from the company’s own online investment platform, institutional funding partners and investors in Lexin Fintech’s asset-backed securities.
The volume of loans on Lexin Fintech’s platform has grown rapidly in the past few years. By the end of September, it had originated a cumulative 60.1 billion yuan (US$9.09 billion) worth of loans since its inception in 2013. For the first nine months of 2017, total loans originated by Lexin Fintech reached 31.3 billion yuan, up 124 per cent from the same period a year ago.
For the first three quarters of 2017, Lexin Fintech’s operating revenue reached 3.99 billion yuan and net income was 140 million yuan.
In the risk section of its prospectus, however, the company mentioned regulatory challenges for the fledging online consumer finance industry.
“It is also possible that the PRC [People’s Republic of China] laws and regulations may change in ways that do not favour our development. In particular, the PRC laws and regulations may impose more stringent requirements and regulatory burdens relating to certain of our target customers. If that happens, there may not be adequate loans originated on our platform.”
Lexin Fintech’s main shareholders include founder and chief executive Jay Wenjie Xiao, K2 Evergreen Partners, Matrix Partners China and JD.com.