Auto-Backed Financing Provider Weidai Seeks $100 Million in NYSE IPO

Weidai connects small- and micro-businesses in China with online and institutional lenders.

Anna Vodopyanova
    Aug 13, 2018 4:44 PM  PT
Auto-Backed Financing Provider Weidai Seeks $100 Million in NYSE IPO
author: Anna Vodopyanova   

Weidai Ltd., which connects small- and micro-businesses in China with online and institutional lenders, has filed a prospectus seeking to raise up to $100 million in its initial public offering in New York, significantly less than was originally anticipated.

The Hangzhou-based firm, which was the largest auto-backed financing provider in China in terms of loan volume between 2015 to 2017, had a market share of approximately 35 percent last year, according to a report by Oliver Wyman cited in the prospectus. 

The company focuses on borrowers related to small- and micro-enterprises, which last year contributed 32 percent of China's gross domestic product. As these businesses often face limited credit opportunities in China, Weidai presents its auto-backed financing system as a solution to the problem, according to the company's filing.

"Auto-backed financing represents an attractive solution for small and micro enterprise owners, as automobiles are their most commonly held valuable assets and proper collaterals enhance their credit profiles and enable them to obtain higher credit limit at lower cost," the company said.

Launched in 2011, Weidai first introduced auto-backed financing in the form of a title loan with collateral registration equipped with a GPS, replacing the tradition of keeping automobiles in a lender's custody.

Currently, Weidai provides loans between 30,000 yuan ($4,400) and 200,000 yuan ($29,000) for a period of one to 36 months with an annual percentage rate ranging from 20 to 36 percent. For the first half of 2018, the average loan totaled 61,800 yuan ($9,000), while 56 percent of borrowers were repeat customers.

The IPO in New York would fund Weidai's general corporate purposes, including possible investments in product development, sales and marketing activities, technology infrastructure, capital expenditures, and improvement of corporate facilities.

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(Source: Weidai prospectus filed Aug. 10)

The proposed IPO size decreased significantly since the company first announced its plans to go public in April. According to Bloomberg, Weidai previously planned to raise nearly $400 million. The company seeks to be listed on the New York Stock Exchange under the symbol "WEI."

The company operates through an offline network of 517 service centers in more than 300 cities in China. It boasts making a lending decision within 30 minutes after receipt of an application and automobile appraisal.

Last year and in this year's first six months, the average rate of return for Weidai's online investors was 8 percent and 7.6 percent, respectively.

Weidai said its revenue last year, generated from service fees to borrowers, as well as fees to online investors, reached $535.8 million, a 101 percent increase from 2016. Income for 2017 jumped 63 percent year-over-year to $71.7 million.

For the first six months of 2018, Weidai reported revenue 20 percent higher than a year ago, at $284.6 million. Net income was $46.4 million, a 15 percent increase from the first half of 2017, the company said.

Citing Oliver Wyman, Weidai said the auto-backed loan volume in China is expected to grow at a compound annual growth rate, or CAGR, of 48.6 percent from 2017 to 2022.

The online micro-lending platform has attracted multiple high-profile investments, including a $159 million series C funding in 2016 led by Vision Knight Capital. Among other key investors were Chinese billionaire Chen Tianqiao's Shanda Group and Shenzhen-listed software developer Hakim Unique Internet Co.

Weidai's founder, chairman, and chief executive officer, Hong Yao, would own the majority of the voting power in the company upon completion of the IPO.

Credit Suisse, Morgan Stanley, and Citigroup are acting as lead underwriters on the deal.

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