China Rapid Finance, a peer-to-peer (P2P) lender based in Shanghai, China, announced that it has set the terms for its upcoming US IPO. The company plans to raise $105 million through the offering of 10 million shares priced between $9.50 to $11.50 a share. At $10.50 a share, China Rapid Finance would have a fully diluted market value of $586 million.
Founded in 2001, China Rapid Finance is a consumer lending marketplace that aims to serve China’s emerging middle class. Their target demographic are employed and well-educated Chinese individuals between the ages of 18 and 29, who live in urban cities, and who are avid mobile users. This demographic, known as EMMA (Emerging Middle class Mobile Active), is estimated to include over 500 million individuals.
The company bills itself as the first to partner with China’s major internet platforms to “identify, select and contact creditworthy EMMAs through multiple data channels at lower customer acquisition costs than its competition.” The core of China Rapid Finance’s platform is its predictive selection and automated decision technologies which streamline the borrower selection and loan application processes which in turn give investors more attractive risk-adjusted returns.
CEO and Founder Dr. Zhegyu (Zane) Wang
, who spoke at LendIt USA 2017, previously served as the head of analytics at Sears Credit, the world’s largest retail credit portfolio. Dr. Wang is also the head of the P2P Division of the China Association of Microfinance and had previously advised the People’s Bank of China on the creation of the National Credit Bureau. Dr. Wang has stated that his dream is to bring affordable credit to China’s emerging middle class. As of December 31, 2016, the company claims to have served over 1.4 million borrowers and facilitated over 10 million loans.
The company plans to be listed under the symbol XRF. The investment banks jointly underwriting the offering are Morgan Stanley, Credit Suisse, and Jefferies. It is estimated that the IPO price will be set sometime next week.
This is not the first big Chinese Fintech IPO. Arguably Alibaba (NYSE:BABA) is the biggest with its global aspirations via its Ant Financial subsidiary. Ant Financial has recently been in the news as it battles for control of MoneyGram.
As for pure Chinese Fintech IPOs, Yirendai (NYSE:YRD), an offshoot of online lender CreditEase may be the best comparison. Back in December 2015, Yirendai’s shares hit the NYSE at$10 each. Today, Yirendai is trading above $20/share representing a decent gain for the P2P lender.
Given some of the recent negativity facing China’s P2P lenders, it will be interesting to see how China Rapid Finance’s IPO turns out.
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