VC-backed China Rapid Finance raises $60m in US IPO

The stock closed on May 2 at $7.90, giving the entire company a market capitalization of around $448 million. CRF sold 10 million American Depository Shares (ADS) for $6 apiece, well below the indicative range of $9.50-11.50, according to a filing. The offering comprised entirely new shares.

Broadline Capital holds a 14.1% stake in the company, while DLB Capital has 16.5%. Their actual voting power is much smaller due to a dual shareholding structure that favors the family of Zane Wang, CRF’s founder, chairman and CEO. He previously worked for Sears Credit, a retail credit card business subsequently acquired by Citibank.

CRF was established in 2001 as a credit card analytics service provider and launched a marketplace lending platform in 2010. It claims to have facilitated approximately 15 million loans to around two million borrowers.

The company’s target market is emerging middle class, mobile active consumers (EMMAs) who have difficulty borrowing from banks due to the absence of credit data, the high costs of traditional data collection and the inability of banks to engage in variable pricing based on credit quality. Oliver Wyman has estimated that China’s total non-bank consumption loan market will be worth $580 billion by 2020.

CRF operates a service model that matches borrowers with a diversified set of sophisticated investors, chiefly high net worth individuals and family offices. The company receives fees from borrowers and investors, including transaction and service fees for loans facilitated through the marketplace. It bears no credit risk for these loans.

Borrowers are acquired through social networks, online travel agencies, e-commerce platforms and payment service providers. Each borrower is assessed using credit scoring technology based on variables drawn from their online footprint. After repayment, an automated system determines which borrowers qualify for larger loans, and on what terms, before recommending them to investors on the marketplace.

There are two categories of loan: consumption loans of RMB500-6,000 ($72-865) range with durations of two weeks to three months, and lifestyle loans of RMB6,000-100,000 with durations of three months to three years. For loans exceeding RMB6,000 borrowers must make submissions to one of 107 data verification centers.

By year-end 2016, CRF had extended 5.97 million consumption loans with a cumulative value of $611.5 million and nearly 38,000 lifestyle loans worth $450.5 million. Revenue came to $55.8 million in 2016, up from $56.1 million the previous year, while net losses expanded from $33.2 million to $40.4 million.

CRF said in July 2015 that Broadline had led a $35 million Series C round at a pre-money valuation of $1 billion. The IPO prospectus notes that CRF received $15 million from DLB Capital and $3 million from Broadline in 2007. The 2015 announcement appears to relate to a bridge financing round, which saw the company issue $30.3 million in coverable promissory notes, with Broadline committing $13.5 million.

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• Topics
• Greater China
• Technology
• Financials
• IPO
• China
• Venture
• Financial Services