The several law firms have filed class-action lawsuits on behalf of shareholders of Yirendai (NYSE:YRD) who acquired shares at some point during 2016 – some of the filings are specifying date ranges. The reason this is interesting is that these law firms are faulting Yirendai for actions taking by the Chinese government. If your Mandarin is any good you may read them here. To quote one filing (they are pretty similar):
“Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects.”
Last week, the Chinese Banking Regulatory Commission (CBRC), along with other affiliated government agencies, released new rules regarding the regulation of Chinese P2P lenders. GPM points to several items that may impact operations of Yirendai including borrower caps “taking public deposits or selling wealth-management products, and must appoint qualified banks as custodians and improve information disclosure.”
Yirendai, a sister company of CreditEase, one of China’s oldest and largest P2P lenders, is a fairly well-established platform. Yirendai went public on the NYSE in December of 2015. The American Depository Shares (ADS) were priced at $10 per share. Today shares trade at $25.84/share – a nice increase for early shareholders.
While the news of the new rules are still settling in, initial reports appear to indicate that larger, better-capitalized platforms will do fine. It is the smaller, undercapitalized platforms that are in for a bit of a shake out.
While news of the government action did appear to correlate with a share price decline in Yirendai, the stock did bounce back a bit this past Friday.