China FinTechs Turn To Overseas IPOs To Raise Capital

With China tightening its regulations, some of the country’s largest FinTech startups are eyeing initial public offerings (IPOS) overseas.

According to a report in Finextra, China’s A-share market is only for profitable companies and many FinTechs in the country are not yet profitable, giving rise to a growing number looking at other ways to raise capital — including IPO markets in other countries. Peer-to-peer (P2P) lenders make up the majority of theses FinTechs, a sector of FinTechs that has faced increasing pressure since China issued new rules for the industry last year, noted the report.

“An increasing number of FinTech IPOs in Hong Kong and the United States are expected to take place,” said Jianbin Gao, a Shanghai-based PricewaterhouseCoopers (PwC) assurance partner, told the South China Morning Post, reported Finextra. “They mainly aim to list in the U.S., though Hong Kong is also an option.”

Among the FinTechs in China looking outside the country for funding include online-only insurer ZhongAn Online Property and Casualty Insurance. According to the report, ZhongAn has a customer base of more than 500 million and aims to raise $1.5 million in an IPO on the Hong Kong exchange. Lujiazui International Financial Asset Exchange (Lufax) and Ant Financial, formerly known as Alipay, as well as a number of P2P lenders such as, Neo Capital and Dianrong, are also eyeing IPOs, noted the report.

China isn’t only instituting tougher rules when it comes to FinTechs. It’s also eyeing the ICO market with concern, banning them altogether earlier this week. TechCrunch reported the Chinese Central Bank said ICOs have “disrupted the economic and financial order.”  

The order, as noted by Chinese financial news site Caixin, was handed down by a committee studying internet-based financial risk, which offered up a list of 60 exchanges that will be inspected. The ICO freeze remains in place until then.