Once one of the largest peer-to-peer lenders in the world, China’s Lufax (NYSE:LU) has hit an all-time low trading on the NYSE. The bid-ask of shares is around $2.17. A year ago, it was trading at over $10 a share, thus delivering a spectacular collapse of shareholder value.
Last month, Lufax received a notice from the exchange that it had breached the threshold to maintain its listing on the NYSE.
Lufax exited the P2P lending sector in 2019 as the government turned against the entire industry.
Lufax is emblematic of Fintech in China. At one time, China was the biggest Fintech market in the world – largely driven by online lending. The Chinese government let things go without much oversight until the House of Cards collapsed and regulators decided that P2P lending was not a good thing. Unlike market-based economies, winners and losers are determined by the CCCP. While some aspects of Fintech are OK, P2P lending was dealt a death card and deemed an undesirable business.
Beyond a dramatic change in regulations, China is in the midst of a worsening relationship with the West – most pointedly with the US. The fact that General Secretary Xi Jinping has told everyone he intends to take over Taiwan by either peaceful means or by force has led many investors to flee the market and look elsewhere. This also adds risk for shares trading on a US exchange for all companies based in China. The big question now is if Xi can pull it off and invade or convince (a long shot) – and then when.
As for shareholders in LU, the downward spiral has been painful. Towards the end of 2020, when the company went public, shares in Lufax traded at around $80/share – as it discussed its global ambitions over the next five years. Guess they got it wrong.
