China's VC-backed PPDai files for US IPO

The company’s filing does not indicate the size or pricing of the offering, or whether its investors will sell any shares. Part of the proceeds of the offering have been earmarked for investment in technologies that support business growth.

Founded in 2007, PPDai claims to be the largest peer-to-peer (P2P) lending platform in China. It serves as a bridge between individual lenders and small-scale borrowers, helping to meet the credit needs of enterprises that rarely receive support from commercial banks. Its service is free for lenders, while borrowers pay a commission.

PPDai primarily offers short-term loans to meet the immediate credit needs of borrowers aged 20-40. Loans originated on the marketplace in 2016 had an average principal amount of RMB2,795 (US$412) and an average term of 9.7 months. More than half of this business came from repeat borrowers. Loan applications can be made online and credit decisions are made in as little as one minute.

Investors can subscribe to loans based on the profiles of approved borrowers or enroll in programs designed by PPDai to cater to different investment preferences. There are risk management procedures and implement protection mechanisms to mitigate investors’ risk exposure, while liquidity demands are met through a secondary loan market.

As of June, the total outstanding balance of loans invested through the PPDai platform was RMB20.6 billion, up from RMB607.4 million in December 2014. The company had more than 6.9 million unique borrowers and 462,000 investors.

With 25.5%, Sequoia Capital China is the largest shareholder after Jack Gu, PPDai’s co-founder and chief strategy officer. Lightspeed China Partners has 10.4%, while Legend Capital and SIG Asia Investment own 6.8% and 6.5%, respectively.

According to a prospectus, Sequoia invested $4.6 million in Series A preferred shares in 2012. It re-upped two years later as Lightspeed led a Series B round, which also featured Noah Holdings, for an aggregate consideration of $15 million. Legend and SIG led the Series C in 2015, with participation from Sequoia, Lightspeed and Oriental Global Group. PPDai received $46.7 million. These rounds were previously reported to be somewhat larger.

Revenue – almost all of which comes from fees charged to borrowers – reached RMB1.2 billion in 2016, up from RMB197.4 million the previous year. Over the same period, the company swung from a net loss of RMB72.1 million to a net profit of RMB501.5 million.

In the past six weeks, logistics operator Best Inc, drug developer Zai Lab, and kindergarten operator RYB Education have all gone public in the US. Micro-lending services provider Qudian and English tutoring business Rise Education will soon follow suit. Meanwhile, in Hong Kong, another financial technology play, Zhong An Insurance, raised HK$11.9 billion ($1.5 billion) through an IPO.

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• Topics
• Greater China
• IPO
• Financials
• Technology
• China
• Exit
• Sequoia Capital
• Legend Capital
• Lightspeed Venture Partners
• Financial Services
• Susquehanna Asia Investment