China Rapid Finance has made a successful debut on the New York Stock Exchange despite worsening losses for the P2P Fintech platform.
On 28 April China Rapid Finance (XRF) raised USD$60 million via an issue of 10 million shares priced at $6 a piece on the NYSE.
The closing price for China Risk Finance was $6.41, for an increase of 6.83% compared to its issue price.
The last major State-side debut of a Chinese Fintech company was in December 2015, when online consumer finance platform Yinrendai raised $75 million with its IPO on the NYSE.
Shanghai-based China Rapid Finance was established in 2001, and commenced online P2P lending operations in earnest back in 2010, targeting the consumer and lifestyle credit market.
In February 2015 began to promote high yield short-term consumer loans, for amounts of between 500 – 6000 yuan ($72 – $870) and maturities of just several months.
The Fintech platform has seen extremely rapid growth on the back of these small short-term loans, with the number of lenders making use of the platform surging from only 100,000 in 2014 to in excess of 1.4 million by the end of 2016.
As of the end of 2016 the platform facilitated the issue of $610 million in lending, with an average interest rate of 21%.
The transaction fee is between 1 – 2% of the loan principal, while the service fee is 0.35%.
The platform’s “lifestyle” loans provide larger amounts of 6000 – 100,000 yuan for longer maturities of up to three years. As of the end of 2016 China Rapid Finance has issued $450 million in lifestyle loans, with an average interest rate of 15%.
With respect to loan quality, the company prospectus indicates that China Rapid Finance saw real default rates of 7.3%, 11.8% and 14.9% in 2014, 2015 and 2016 respectively.
These comparatively high default rates haven’t deterred the bulk of P2P lenders, with 67% of the 1.4 million capital providers making use of the platform on a repeated basis.
China Rapid Finance considers this large volume of repeat lenders to be the key to future earnings, particularly given that they tend to increase their loan amounts the longer they use the platform.
Despite the large number of lenders who have signed up with the platform, China Rapid Finance has racked up worsening losses over the past several years.
While net profits were $130,000 in 2014, by 2016 the company was posting net losses of $33.36 million, due to the constant revenue declines.
These declines were due to the discounts that the company provided for transaction and service fees in order to incentivise clients, as well as continuous gains in operating costs, particularly respect to IT, data analysts and customer support staff.
Company CEO Wang Zhengyu remains extremely confident about the company’s prospects, telling media that the Fintech lender will begin earning money its recruitment of new clients comes to an end.