Uxin Shares Rise 3% on Revenue Growth, Narrowed Losses

Uxin is facing lawsuits from a number of U.S. investors' rights litigators but sees improved year-over-year financial results.

Anthony Russo
    Nov 27, 2019 12:00 PM  PT
Uxin Shares Rise 3% on Revenue Growth, Narrowed Losses
author: Anthony Russo   

The stock in Uxin Ltd. (Nasdaq: UXIN) was trading up 3% on Wednesday afternoon, at $2.69 per American depositary share, on strong revenue growth in the third quarter.

The online marketplace for used cars, based in Beijing, said in a statement today that in the three months through September its revenue reached $65.2 million, up 33% year-over-year. Net loss narrowed to $37.8 million, or 4 cents per share, compared with $86.6 million, or 9 cents per share, a year ago.

Zhen Zeng, the chief financial officer of Uxin, said in a statement today, "We believe our losses will continue to narrow as a result of our ongoing efforts in cost control and enhancing operating efficiency."

Uxin said it expects to generate revenue in the range of $76.8 million to $79.7 million in the fourth quarter.

While China's auto market has seen a decline that has lasted for more than a year, sales of used cars have enjoyed some growth. In September, used cars sales were at a 7% upward trend, at 1.31 million units, Chinese state-run media Xinhua reported.

Meanwhile, in the United States, Uxin has faced class action suits commenced by a number of law firms as early as in February. The investors' rights litigators claimed that the Chinese company misled its shareholders in IPO filings. Uxin completed its initial public offering last year, raising $400 million, and since then has traded well below its offering price of $9 per ADS.

"According to the complaint, leading up to the IPO, Uxin claimed that it was experiencing rapid growth in both its consumer-aimed and business-focused segments," Robbins Arroyo LLP, a California-based law firm, said in a statement in May. 

The firm wrote, "Based on its misleading registration documents, Uxin held its IPO in June 2018, and generated over $205 million in proceeds. In particular, Uxin failed to disclose that the company would stop providing complementary services to its customers and instead connect consumers to dealers who would provide such services. As a result, Uxin's auction business, which sells used cars to dealers, would be negatively impacted. Just two months after the IPO, in August 2018, Uxin announced a strategic change in its approach in serving customers with car-selling needs. Shortly thereafter, in November 2018, Uxin reported that its transaction volume had decreased by 8.5%. Following this news, Uxin's share price closed at $4.50, approximately 50% of the IPO price of $9.00 per share. The stock now trades even lower at just $2.72 per share, approximately 70% below the IPO price." 

In July and August, the SEC requested clarifications on the information Uxin provided in its prospectus and subsequent filings. The questions were related to the change in charging service fees to car dealers without financing solutions and other "inconsistencies." 

Uxin responded that it has discontinued charging transaction facilitation service fees to car dealers and proposed to add a statement to its disclosure, including the following: "The impact of not charging transaction facilitation fees for intra-regional 2C transactions without financing solutions resulted in a decrease of transaction facilitation revenue of RMB84.5 million (US$12.3 million) in 2018."