Analysis Featured

China Rapid Finance’s U.S. IPO Has Been Less Than Stellar

Chinese marketplace lenders do not enjoy a stellar reputation in the world market, but the sheer size of the market renders it virtually impossible to ignore them. According to one report, there are 2,000 active P2P lenders in China, and in January alone, P2P transactions accounted for $32 billion. In 2015, one of the biggest Ponzi schemes in the country’s history was exposed after the internet lender Ezubao was found guilty of duping more than 900,000 people for almost $7.6 billion. To prevent such frauds, the Chinese Banking Regulatory Authority (CBRA) has mandated that P2P lenders need to appoint a commercial bank as custodian for their clients’ funds. Such sweeping changes have been placed to safeguard the interest of lenders, borrowers as well as the investors.

Enter China Rapid Finance

China Rapid Finance was founded in 2001 as a consumer lending marketplace aimed at serving China’s emerging middle class. The company wants to target urban Chinese between the ages 18 and 29. This demographic consists of over 500 million individuals and is known as “Emerging Middle-Class Mobile Active” (EMMA). It has partnered with major internet platforms in China to locate creditworthy EMMAs using various data sources. The company seems to have hit the sweet spot as it has served more than 1.4 million borrowers and has facilitated over 10 million loans.

The company offers two types of loans to customers. Its focus is to help them in building a credit history.

The first type of loan is a consumption loan that ranges from $72 to $865. The other type of loan is for larger purchases like college fees and healthcare and ranges from $865 to $14,400. According to the company, EMMAs borrows roughly 10 times per year. So by lending to them, the company is able to acquire a long-term repetitive customer base.

China Rapid Finance’s U.S. Initial Public Offering (IPO)

China Rapid Finance listed on April 28th, 2017 and opened for trading on the New York Stock Exchange under the symbol XRF. The company was planning to raise $105 million by offering 10 million American depository shares (ADS) at an average price of $10.50 to achieve a fully diluted market value of $586 million.

The company’s 10 million ADS were finally priced at $6.00 allowing XRF to raise $60 million, which came as a big setback for the company considering its funding goal. It was supposed to be a better outing for the company since it had managed to raise $35 million in Series C funding at a valuation of $1 billion. Today, the company is valued at $350 million and opened at $7.48 per share.

Source: Google Finance

Morgan Stanley & Co., International plc, Credit Suisse Securities (USA) LLC and Jefferies LLC were the joint book runners for the IPO.

Performance of Other Chinese Fintech Company at NYSE

China Rapid Finance Ltd is not the first Chinese fintech company to be listed on NYSE. Yirendai Ltd, the consumer finance arm of Chinese P2P lender CreditEase, has been doing fairly well since their IPO compared to their American counterparts like Lending Club and OnDeck, who have continued to struggle.

In 2015, Yirendai shares hit NYSE at $10 each. Today, its shares are trading over $23, representing rich gains for the company’s investors.

Chinese companies prefer the United States stock exchanges because they feel that America is much more mature and receptive to marketplace lending. What will be interesting to see is whether other Chinese fintech companies follow China Rapid Finance. Some already have. The risk of taking a hit on valuation is an extremely pertinent matter. But Chinese companies will still look at American shores for the depth of their capital markets.


IPO is a crucial milestone for start-ups to measure their success and raise capital from the public to kickstart their journey as a mature company. But alternate lending startups and IPOs haven’t gelled well in the past, to say the least. Lending Club, known as the pioneer of tintech lending, found itself in a mess due to lapses in disclosures, which led to its founder-CEO Renaud Laplanche leaving the company in 2016.

Another fintech biggie, OnDeck Capital, is trading lower by more than 50% from its January highs. Though American fintech lenders are delaying their public offerings, China Rapid Finance Ltd has bucked the trend by going for an IPO.

The American fintech lending industry has been extremely quiet with regards to any plans for an IPO. Investors are also not keen with the underperformance of OnDeck and the regulatory shenanigans of Lending Club. But Chinese firms are keen to explore the opportunity to get listed. One big advantage is that listing has huge bragging rights and gives the company a massive reputational boost, especially in front of lenders back home. It will be interesting to analyze their long term performance on the American exchanges. Will they able to sustain the expected scrutiny from American investors and regulators is also a big question mark.


Written by Heena Dhir.


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