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  • China’s Fintech Giants Scramble to Rethink IPOs, Raise Cash
    Bloomberg

    China’s Fintech Giants Scramble to Rethink IPOs, Raise Cash

    (Bloomberg) -- Jack Ma’s vision of the future of finance in China is being upended by regulators, along with the ambitions of conglomerates that followed his lead.Ma’s Ant Group Co. is in talks with regulators about injecting capital into its micro-lending units just weeks after its $35 billion initial public offering was halted in a sector-wide crackdown. The listing plans of e-commerce billionaire Richard Liu’s JD Digits Technology Holding Co. have also been thrown into limbo. Lufax Holding Ltd. had to renegotiate terms with some shareholders after its recent IPO valued China’s largest listed online lender at less than a previous funding round.The details come from people familiar with the discussions, who asked not to be identified speaking on private matters.It’s all part of the rapidly shifting landscape for China’s fintech leaders, which till recently offered the most compelling evidence of technology giants using their might -- and a light regulatory touch -- to rewire traditional financial services. They are now rushing to shore up capital, mulling business overhauls and bracing for more turbulence as industry watchdogs set their sights on areas spanning lending, banking partnerships and data privacy.“Financial stability is political in China,” said Sean Ding, a Washington DC-based analyst at Plenum, a research firm specializing in Chinese politics and economy. “The whole point of sending such a strong message is for future fintech companies to be more careful, understand that their products can bring about financial risk.”The call for tightened oversight comes from the very top. President Xi Jinping urged financial regulators to “dare to” master their supervisory role, according to commentary penned by an official at the banking regulator, published in the Party mouthpiece People’s Daily this month.And it’s the $1.2 trillion online lending industry that’s been first in line for a shake-up, with many companies already trying to meet stringent rules that are yet to be finalized.Ant, the biggest player in online lending, has been the most visible casualty given the abrupt halt to its record-setting IPO this month. Apart from discussions about replenishing capital, Ant is also slowing the pace at which it packages existing loans into asset-backed securities to sell to investors, a person familiar with the matter said.The company currently keeps about 2% of loans on its own balance sheet, with the rest funded by third parties or packaged as securities and sold on.“When Ant does return to the market, investor sentiment is expected to be more restrained,” Bernstein Singapore-based analyst Kevin Kwek wrote in a recent report, adding that its valuation could be cut up to 28%.Francis Chan, a senior analyst at Bloomberg Intelligence, estimates that Ant may need to inject as much as 80 billion yuan into its two consumer lending units to comply with the new regulations on funding and leverage. Ant declined to comment.The turn toward caution is hindering JD Digits, the finance affiliate of e-commerce giant JD.com Inc., which filed for an IPO with the Shanghai Star Market in September. JD Digits is weighing changes to its listing plans and discussing options with existing shareholders, people familiar said. Its previous target of debuting in the first half of 2021 now looks difficult, according to one of the people.JD Digits said in a text message that it is working with regulators, declining to comment further.Newly listed Lufax is an example of the dangers of going public when the scope of increased regulation isn’t clear.The fintech unit of Ping An Insurance Group Co., China’s biggest insurer by market value, warned investors before it listed that it planned to increase the proportion of loan risk it bears with lending partners to 20% from 2% because of regulatory trends, people familiar said.Lufax was valued at less when it listed than in a previous funding round and allowed existing shareholders to swap their stock into convertible bonds to make up for potential losses, according to people familiar. The lender has seen its stock swing violently since it recent debut as it’s become a target for short-sellers.Lufax declined to comment via email.Chinese regulators are becoming vocal about reining in the booming digital finance sector, signaling the clampdown has further to run.Liang Tao, a vice chairman of the China Banking and Insurance Regulatory Commission said this month that fintech companies don’t change the nature of the financial industry and firms should be subject to the same supervision and risk management as banks. In areas where a market monopoly can be spotted, Liang said, the regulator will step up probes to ensure fair competition and order.A Ping An unit, together with a few banks, was reprimanded by the banking watchdog this month for bundling its own insurance products when making micro loans. Ping An Puhui Financing Guarantee Co. -- part of Lufax’s loan platform -- also charged high service fees, pushing up costs, according to a statement.Lufax has already started offering credit guarantee options from multiple insurance partners so customers have more choice, a person familiar said. It also significantly lowered fees in September, reducing clients’ costs, the person said, declining to be named as the measures were not publicly announced.“In the short term, investors are likely to grow unsure about the transparency of financial regulation in China,” said Ken Peng, head of Asia investment strategy at Citigroup Inc.’s private-banking arm. “Policy makers are cautious about fintech, which is a new industry and takes time for regulation to adapt.”(Adds comment from analyst in 11th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • JD Unit Seeks up to $3.5 Billion in Asia’s Biggest Health IPO
    Bloomberg

    JD Unit Seeks up to $3.5 Billion in Asia’s Biggest Health IPO

    (Bloomberg) -- JD Health International Inc. is looking to raise as much as $3.5 billion in its Hong Kong initial public offering in what would be Asia’s biggest health-care listing on record.The health-care unit of China’s No. 2 e-commerce giant JD.com Inc. is selling 381.9 million shares at HK$62.8 to HK$70.58 each, according to terms of the deal obtained by Bloomberg News. The price range values JD Health at $25.3 billion to $28.5 billion.JD Health secured six cornerstone investors for its IPO who agreed to subscribed for as much as $1.35 billion of stock, including Singapore sovereign wealth fund GIC Pte, Hillhouse Capital and BlackRock.The planned IPO is set to surpass the $2.3 billion offering by Japan’s Ostuka Holdings Co. a decade ago as Asia’s biggest listing in the sector, according to data compiled by Bloomberg. The health-care and pharmaceutical sectors have seen a record wave of listings in Asia this year, spurred by strong investor demand amid the coronavirus pandemic.JD Health is the largest online health-care platform and online retail pharmacy by revenue in China, according to its prospectus. The company recorded revenues of 8.8 billion yuan ($1.33 billion) in the first half of this year, up from 5 billion yuan a year earlier.JD itself completed a secondary listing in Hong Kong earlier this year in which it raised $4.5 billion in what is the city’s largest first-time share sale this year. The e-commerce giant is also mulling listing its logistics business as soon as next year, Bloomberg News reported on Tuesday.Bank of America Corp., Haitong International and UBS Group AG are joint sponsors for JD Health’s IPO. The company plans to price the offering on Dec. 1 and list Dec. 8.(Updates with financial information in 5th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • JD’s Logistics Unit Weighs IPO at $40 Billion Valuation
    Bloomberg

    JD’s Logistics Unit Weighs IPO at $40 Billion Valuation

    (Bloomberg) -- JD.com Inc.’s logistics unit is considering an initial public offering that could raise at least $5 billion, according to a person familiar with the matter.JD Logistics is targeting a valuation of about $40 billion, the person said, asking not to be identified as the information is not public. The company is leaning toward choosing Hong Kong as a venue for the IPO, the person said. JD has held early discussions with banks, said people familiar with the matter.The IPO plans are still preliminary, the people said. The company could decide not to proceed with a listing and details including size and venue could still change, they said. The potential listing was first reported by IFR.A representative for JD did not immediately respond to requests for comment.China’s No. 2 e-commerce giant JD spun off its logistics arm into a separate entity in 2017. JD Logistics operated more than 800 warehouses across China as of Sept. 30, according to JD’s most recent earnings. JD reported net revenue from new businesses, which includes the logistics unit, of about 11 billion yuan ($1.7 billion) during the September quarter. The figure represents roughly 6% of JD’s total revenue.JD is currently seeking to list its health care unit in Hong Kong in an IPO that would raise about $3 billion, Bloomberg News has reported. JD Digits, its fintech affiliate, filed an IPO prospectus in September with the Shanghai Star Market, though it is unclear how changes to micro-lending rules will affect the unit’s listing plan.The e-commerce company also raised $4.46 billion in a second listing in Hong Kong earlier this year.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.