The company achieved revenue of 1.047 billion yuan in the second quarter, down 1.69 percent from the same period last year; net profit of 608 million yuan, down 3.8 percent from the same period last year. At the same time, the amount of shares planned to buy back has reached 54.5% of its listed financing amount.
Investment Times reporter Song Xi
In the wave of listing in the United States, as a network lending platform for the elderly, the patronage loan (NYSE: PPDF) can be said to be worthy of the name. However, the reality is always cruel, and it is not easy to play with the US capital market.
On September 6, Scott + Scott Attorneys at Law LLP, its U.S. shareholder and consumer rights litigation firm, announced that it would investigate whether the sale of loans violated U.S. securities law.
According to Scott + Scott, the main content of the investigation was to assess whether the documents submitted to the Securities and Exchange Commission (SEC) before the auction contained false information, or to hide information about the commercial behavior of the auction, loan interest rates or loan quality.
Affected by the news, the share price fell nearly 10% on the day of the auction, and finally closed at $6.22, down 7.85%. By the end of September 12th, its stock price had reached $5.97, which was 59.2% lower than the 52 week high. Industry insiders said the drop in share prices was due to allegations of fraud or punishment from the US Securities Regulatory Commission.
In response, the government responded to the media by saying that it operates in accordance with regulations and has transparent information and is not afraid of such investigations.
Two law firms surveyed by the United States
Established in Shanghai in 2007, the company has been positioning itself as a financial technology company. As of June 30, 2018, the total number of borrowers and investors was 12.409 million, 613.7 million, and the total number of registered users increased from 65.41 million at the end of 2017 to 78.144 million.
In November 10, 2017, the platform was successfully launched in the US NYSE. The loan was reported to have raised $270 million in the IPO, including $220 million in public offerings and $50 million in private equity offerings to Sin Hung Kee. On the same day, the auction price was $13.3, with a total market value of about $4 billion.
However, after the listing, its performance was not satisfactory, and the stock price fell sharply at the end of the month. "Mainly because the market is worried that the Chinese government will strengthen the supervision of the P2P lending industry, curb heavy interest rates and other acts," the loan side said.
After December, its stock price continued to adjust, and less than two months after its listing, it was close to cutting.
"Judging from the credentials of the loan, it is more robust than the subsequent Show Fun Store (NYSE: QD) and so on, experiencing all the ups and downs of the Internet financial industry. However, the timing of the company's listing was not very good, because at that time the listing of interest stores was causing a huge controversy, the Internet lending market was buzzing, the listing of this period has a great impact on stock price volatility. For the performance of Pat lending after listing, insiders told reporters.
The latest figures show that the total market capitalization of the auction is roughly the same as that of the store, at $1.795 billion and $1.729 billion, respectively.
However, how long this "body position" lead can last is hard to predict. The investigation by the US law firm is undoubtedly a major blow to the pat lending. According to past penalty cases, if a listed company is identified as fraudulent, it will face a fine and serious related personnel will be sentenced. If a shareholder's class action arises, the listed company will also face huge compensation. This is bound to further pressure on its share price.
Scott + Scott LLP is an authoritative US law firm headquartered in Connecticut with offices in New York City, Ohio and California. Prior to this, the company's main agency cases were fraudulent individual investors and institutional investors by listed companies.
Notably, in addition to Scott + Scott, Robbins Arroyo LLP, another shareholder rights law firm, said it was investigating whether some of its executives and directors had violated federal securities laws related to the company's November 2017 IPO.
The company said in a statement on its website that the investigation will cover whether the documents submitted to the Securities and Exchange Commission contain misleading statements about the commercial behavior of the auction, the interest rate of the loan on the auction platform or the quality of the loan on the auction platform.
Two quarter net profit decrease
In June 2012, it registered a PPDAI Group Inc. as a holding company in the Cayman Islands, and registered a PPDAI (HK) LIMITED subsidiary in Hong Kong to control the domestic structure.
The ownership structure shows that it registered in Beijing as a wholly-owned holding parent company of Penpeng Rongxin Investment Consulting Co., Ltd. and Shanghai Penpeng Loan Financial Information Service Co., Ltd. As for shareholders, Wind showed that as of March 31, 2018, the largest shareholder was Chief Technical Officer Gu Shaofeng, with a 26.5% stake; CEO Zhang Jun had a 5.8% stake; and Chief Marketing Officer Hu Honghui held a 5.3% stake.
As can be seen from the past data, the auction also made great efforts and sufficient preparations for the listing, completed three rounds of financing before the listing: in October 2012, the auction loan A rounds of financing received tens of millions of dollars of Sequoia capital level investment; in April 2014, B rounds of financing, investment institutions for the speed of light Anzhen China Venture Capital, Sequoia Capital and Noah Wealth; April 2015 C round of financing, led by Lenovo Holdings Junlian Capital and Haina Asia, VMS Legend Investment Fund I, Sequoia Capital and other institutions to follow.
However, since the listing, investors and investors are anxious not only about the stock price, but also about the company's operations.
In August 22nd of this year, pat lending released the two quarter earnings in 2018. Data show that the second quarter of the sale and loan revenue of 1.047 billion yuan, down 1.69% year-on-year; net profit of 608 million yuan, down 3.8%.
The decline in both revenue and net profit was explained in the earnings report as a result of lower average transaction rates in the quarter.
Meanwhile, in the second quarter of this year, the company's board of directors approved August 21 to expand the existing share repurchase program, bringing the amount of repurchase from $60 million to $120 million, which is equivalent to 54.5% of its open market financing. The duration of the company's existing share repurchase plan is also extended by 12 months with the approval of the board of directors, together with the previously authorized remaining $20.63 million, which is expected to be worth as much as $80.63 million from August 21, 2008.
"The increase in our share repurchase program demonstrates our commitment to shareholder value," Zhang said. We remain confident in our core business prospects and our ability to seize long-term growth opportunities in our industry. The industry has undergone many major changes recently. We believe that a sound regulatory framework and industry integration will be conducive to the long-term growth and sustainable development of the industry. As industry leaders, we have the longest operating history, strong know-how and core competencies, and we are confident in the upcoming P2P filing and ready for future growth.
However, given the current unfavorable news, the market has yet to test whether lending can be as fearless as it suggests.
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