Chinese Online Lender’s IPO On Shaky Ground

LexinFintech Holdings Ltd., operator of China’s leading online lender Fenqile, was slated to meet with advisers over the weekend to decide if it will go ahead with a proposed initial public offering (IPO) in the U.S.

According to Bloomberg reports, the company is expected to decide soon if it should launch a roadshow for its IPO or wait until a later time to go public. Investors have been questioning the regulatory climate for online lenders in China during premarketing meetings for the IPO. 

LexinFintech filed form F-1 with the U.S. Securities and Exchange Commission (SEC) on Nov. 13, also announcing plans to conduct an IPO and to list on NASDAQ under the symbol LX. The company continues to work toward those objectives as described in the filing, aiming to raise $500 million in its U.S. IPO — though that amount could change.

News of increased scrutiny of the online market in China is leading to concerns about the LexinFintech IPO and the market in general. Last week, a high-level Chinese government agency issued a notice urging provincial governments to halt approval of new web-based online lenders.

According to news from Reuters, the regulatory body in charge of reducing risks in the exploding Chinese online finance sector also advised regulators to restrict the granting of new approvals of microloan firms looking to lend money across China.

The increased regulation put pressure on Qudian, the Chinese online lender that is backed by Alibaba and its affiliate Ant Financial. Qudian, which reached profitability in 2016, runs a website enabling college students and young workers to purchase laptops, smartphones and consumer electronic gadgets on a monthly installment basis.

China Commercial Credit, Jianpu Technology and China Rapid Finance each saw a dip in their stock prices on news of the increase in regulation by the Chinese government.

Internet microloan companies have been performing well during the last year, partly due to a lack of stringent government rules. The firms are lending to Chinese consumers who have been turned down by Chinese banks. However, interest rates on these tiny loans can be very high — something borrowers often do not realize.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.