Morning Report: Meet Qudian!
Who was I to resist such a tempting story?
As it turns out, the firm’s growth and profits are impressive. So impressive, in fact, that it feels a bit more like one of the Big 5 IPO pieces than a current-cycle IPO. So this morning, we will dive into Qudian’s F-1 to learn what the hell is going on.
What Does Qudian Do?
Qudian is a Chinese micro-lending company that claims to use “big data” to drive “small credit.”
The firm “target[s] hundreds of millions of quality, unserved or underserved consumers in China” according to its filing, noting that there are hosts of “young, mobile-active consumers who need access to small credit for their discretionary spending but are underserved by traditional financial institutions” in the country.
The short credit tools that Qudian provides that it states are often used for “discretionary consumption.” Qudian’s F-1 states that “[o]n average, an active borrower drew down credit approximately six times” during the first half of this year.
And, of course, Quidan is completely digital, meaning that it can quickly pour money into Alipay accounts of its users. Alipay is the mobile payment system owned by Ant Financial. Ant Financial is a subsidiary of Alibaba, which, in turn, is listed in the United States.
In short: Qudian provides digital short-term loans to Chinese consumers, largely via the Alipay network. Sounds good. Let’s check the results.
We’ll move only in dollars to keep things simple. Translating from various tables, here’s what you need to know, starting with revenue:
- 2016 revenue: $212.8 million.
- 2017 H1 revenue: 270.4 million.
And net income on a GAAP basis:
- 2016 net income: $85.1 million;
- 2017 H1 net income: $143.6 million.
As you can see, we are doing an apple-ducks comparison here for dramatic impact. The company’s first half of 2017 is larger than its full-year 2016 result. Earlier in its F-1, Qudian notes that it saw 393 percent growth in the first half of 2017 compared to the first half of 2016. Impressive.
Of course, all this growth could be a concern. How long the company can grow at its current pace is a mystery, and if it is priced on a growth curve similar to the one it put up over the last year, it could Snap Inc. itself.
According to Crunchbase, the company has raised $873.83 million so far in its life, including a $448.83 million round last June. Given the company’s financing structure, its cashflow situation can be a bit occluded. However, the firm claims net assets of more than a half billion and states that its “anticipated cash flows from operating activities will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months.”
Handicap that as you will.
According to its F-1, Qudian wants to raise $750 million, a number that is, as always, an estimate before a price range is set. However, It’s far too high to be a placeholder — $100 million is the normal number for that — so we should expect a massive offering if all goes well.
Profits, a big raise, and a company going public when it is still mid-growth? Be still my beating GAAP.
From The Crunchbase Daily:
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The Engine raises $200M for tough tech
- The Engine, a venture fund founded by MIT to focus on tough tech innovations, announced that it has closed on $200 million for its first fund and has made investments in seven startups based in the Boston area.
Why WeChat is big in micropayments
- Integrated into the daily life of most Chinese people with smartphones, Tencent’s WeChat is used to book appointments, pay bills, schedule deliveries, and even for micropayments. While micropayments for content have not yet taken off in the U.S., it’s possible WeChat’s strategy could provide a template, Crunchbase News reports. In other news, we look at why Pinterest is still opting to remain private.
iStockPhoto / Petrovich9
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