China's Qudian gains on debut after $900m US IPO

The company – which previously went by the name Qufenqi – sold 37.5 million American Depository Shares (ADS) at $24.00 apiece, above the target range of $19.00-22.00. The offering could swell to $1.04 billion if underwriters exercise the overallotment option in full, according to a release. The stock ended October 18 at $29.18.

None of Qudian’s financial or strategic investors sold any shares through the IPO. Following the offering, Beijing Phoenix Fortune is the largest external shareholder with 17.5%. Shenzhen-listed game developer Beijing Kulun Tech has 17.4%, Source Code Capital has 14.2%, and Alibaba Group’s Ant Financial and BlueRun Ventures own 11.4% and 6.4%, respectively.

Their voting power is far smaller due to a dual-class share structure that favors Min Luo (pictured), Qudian’s founder, chairman and CEO. He holds 19.2% of the ordinary shares.

Launched in 2014, the company targets young mobile users who need access to small amounts of credit for discretionary purchases but are underserved by traditional financial institutions. It offers cash credit products – the cash is usually deposited in users’ Alipay accounts – and merchandise credit products that allow users to pay for goods in installments.

For the six months ended June, Qudian’s cash credit products had an average size of RMB920 ($136) and term of two months, compared to RMB1,250 and eight months for merchandise credit products. Qudian receives interest payments on the former and interest payments and commission fees on the latter. Over the same period, the company facilitated approximately RMB38.2 billion in transactions to seven million active borrowers.

Qudian employs big data-enabled technologies, such as artificial intelligence and machine learning, to make credit assessments. It also collaborates with Zhima Credit, a credit assessment provider owned by Ant Financial. In addition, the alliance with Ant Financial means Qudian can use Alipay as its primary means of engaging with borrowers.

BlueRun provided the company’s first institutional funding in 2014 and then re-upped later the same year alongside new investors Source Code and Golden Summit International. In 2015, Beijing Kunlun paid $50 million for a 20% stake – valuing the company at $250 million – as part of a $100 million round that also featured Source Code and Blue Run.

A few months later, Ant Financial led a $200 million round, with the three investors from the previous transaction all re-upping. Qudian then shifted its focus to a domestic IPO, removing its variable interest entity (VIE) structure and raising two rounds of local currency funding, including one worth RMB3 billion ($490 million) from onshore investors such as Beijing Phoenix Fortune.

The company recorded revenue of RMB1.44 billion in 2016, up from RMB235 million the previous year. Over the same period, the company moved from a net loss of RMB233.2 million to a net profit of RMB576.7 million.

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• Topics
• Greater China
• Financials
• Technology
• IPO
• China
• Financial Services
• BlueRun Ventures
• Source Code Capital
• Alibaba Group