Author: Guo Jianhang
NYSE: PPDF, the U.S. listing platform, has been hit by an investigation crisis from U.S. law firms that has focused on the platform's core business.
Scott + Scott Attorneys at Law LLP, the U.S. shareholder and consumer rights litigation firm, announced it would investigate whether the sale violated U.S. securities law. According to public information, the main content of the investigation was to assess whether the documents submitted to the Securities and Exchange Commission (SEC) contained some inaccuracies, or to hide information about commercial practices, loan interest rates or loan quality.
The reporter of China Business Daily learned that the people who made the loan questioned the investigative motive of the other party. Many times, Scott + Scott has said that the motive for investigating the lending was related to the short-selling of prospective Chinese firms, in which the institution could benefit commercially.
In addition, the pat said that it had not communicated with the other side.
Stock price cut
Up to now, two agencies have publicly stated that they are investigating the auction.
Prior to the Scott + Scott announcement, on August 8, Robbins Arroyo LLP, a shareholder rights law firm, also publicly said it was investigating whether some of the executives and directors who made the loans violated federal securities laws relating to the company's November 2017 initial public offering. According to the announcement on the official website of Robbins Arroyo LLP, "the investigation will cover whether the documents submitted to the Securities and Exchange Commission (SEC) 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."
Under the two accusation, the auction price also fell. Scott + Scott's share price fell 7.85% to $6.22 a share on Sept. 7 after announcing an investigation into lending, according to Eastern Fortune. com. After Robbins Arroyo LLP announced its investigative offer on August 8, the shares were trading at $4.32 a share, compared with $4.35 a share on August 7.
U.S. lawyers mentioned in the case of short-selling profits in China's prospective equity firms, the mode of operation is that some U.S. law firms generally issued investigative statements in the name of investors, and then prompted investors as plaintiffs to entrust them to investigate and file complaints to the court. At the same time, the US securities litigation system determines that shareholders' rights protection has almost no cost and low threshold. The costs arising from the initial litigation are also paid by lawyers. The lawsuit will win, and the lawyer will get a compensation of about 30%.
Regarding the investigation progress of the two firms and whether they have communicated with the lender, the lender said, "No communication has been made so far, and the law firms that announced the investigation are not independent third-party institutions. They are likely to serve some short-selling institutions to make short targets through investigation. We must share the stock in order to obtain huge business benefits.
According to the official websites of the two law firms, Scott + Scott began to recover losses of interest for individuals and institutional investors who suffered major stock fraud in 1975, and participated in securities, corporate management and shareholder rights litigation for a long time. Robbins Arroyo Law Firm's website shows that its main business is to monitor illegal market activities affecting customers'investments in order to prevent economic losses or damage to clients' investment assets due to illegal activities.
Open market analysis shows that there are two concepts of short in the narrow sense and short in the broad sense in the US stock market. In the broad sense, short can include all kinds of trading or non-trading activities, that is, market manipulation, aiming at driving asset prices down.
According to financial data, the profit of the first quarter of 2018 was more than 400 million yuan, and the second quarter of 2018 was 600 million yuan.
Although the profits from the auction were good, its share price went down after listing at the end of 2017. In November 10, 2017, the auction price of the auction in the NYSE was $13.3 / share. As of September 13, 2018, the share price of the loan was $5.97, down more than 50%, and the share price has been cut back.
In response to the stock price decline, the auction said that the stock price decline is mainly due to two reasons, one is the current overall market environment, the other is the industry is facing uncertainty, filing expectations and future industry development, will affect investors'judgment of the stock price.
In addition, reporters noted that the auction in the second quarter of the financial results disclosed that the board will expand the size of stock repurchases, from the previous $60 million to $120 million.
Shares rose 13.58% after the news of stock buyback. "The increase in our share repurchase program demonstrates our commitment to shareholder value," said Zhang Jun, CEO of the stock repurchase program. We are confident in our core business prospects and our ability to seize long-term growth opportunities in our industry.
Sha Quan, director of Fukuoko Datong Investment Research Center, said publicly that the repurchase of listed companies'own stocks can explain at least two problems: first, the market is in a period of low popularity, trading is relatively light, often in the bottom of the market; second, from the perspective of industrial capital. It means that the share price is below or near the value of the company. The repurchase price of listed companies will at least boost market participants'confidence in individual stocks in the short term, and the stock price of listed companies after being increased will be stronger than the market performance in the short term.
Service charges focus
Both companies questioned the misleading description of loan interest by Pat lending.
In terms of borrowing rates and asset quality, according to the IPO prospectus submitted when the loan was listed in the U.S. in October 2017, "as of the first half of 2017, the loan overdue rate was 4.2% in 2016 and 4.3% in 2015." The content of the loan interest rate part shows that "only part of the platform borrowers'loan interest rate is more than 24%, the interest rate of all loans are below 36%.
In the 2018 China Daily, pat lending continued its downward trend in the first quarter since the overdue rate. As of June 30, 2018, the overdue rates of 15-29, 30-59 and 60-89 days were 0.83%, 1.21% and 1.05%, respectively, down 0.04, 0.9 and 1.38 percentage points from the first quarter.
According to reporters, the two law firms for the question of loan interest rates, mainly focusing on borrowers for the purchase of loans to collect pre-service fees there are different views. For the service charge in advance and other issues, before a user in the open platform said, "November 29, 2017 in the auction loan 6500 yuan divided into six months to repay... Payment was received on that day, but the amount was only 5980 yuan. The monthly amount should be 1238.14 yuan per month. The sum is 7428.84 yuan. The total interest rate is 924.84 yuan, which is 14.28% years interest rate according to 6500 yuan. And from the principal of 5980 yuan to calculate to return 1448.84 yuan, the annual interest rate of 24.22% with the contract written on the 9.5% annual interest rate is completely out of line. Then it was found that there was actually a $520 charge for the list fee. And the so-called quality assurance special fee is 124.58 yuan per month. Those were not mentioned at the time.
On the other side of the allegations of false disclosure of information, patronage said, "patronage as a Chinese company, in business is in line with Chinese legal requirements, on the issue of pre-service fees, in late 2017 has been abolished, the current service fees are charged in phases, and will not be pre-charged. In addition, we will disclose the information disclosure of US investors at the right time.
There is public information pointing out that the loan quality of the auction exists problems, more than 50% of the assets are not covered by the guarantee. In this regard, the pat loan side only indicated that the guarantee share of the quality assurance fund is now in the process of gradual digestion. For the future in improving the quality of assets, we will first make further improvements in credit reporting, such as access to the Baihang credit system, and then reduce the cost of wind control by improving technological capabilities. In the future, we will continue to insist on small business services, take the direction of information intermediary, followed by some business development in the export of science and technology.
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