Weekly Roundup: Chinese Fintech Deals

Created On:2016-01-10 Written By:Spencer Li, VP Product of Fincera Inc.

Last week, news of both Ant Financial and JD Finance having future plans to go public via IPO on the Chinese mainland market surfaced. If these plans are true and able to succeed, Ant Financial and JD Finance may be the first VIEs to go public on China’s stock market. As some investors may already know, many Chinese internet companies are structured in the form of a Variable Interest Entitiy (VIE). Early on, Chinese internet companies needed international capital, but the law forbids any foreign capital in the internet industry. The VIE structure circumvents this law because a foreign company, usually registered in the Cayman Islands, controls the domestic business through a contract but does not own it. The loophole was quite simple, and regulators seemed to turn a blind eye until the CSRC banned VIE-structured companies from listing on Chinese domestic markets.

In late December, the State Council approved the launch of a new strategic emerging industries board on the Shanghai Stock Exchange, as well as changes to existing capital market regulations to give companies better access to funding and encourage them to list on domestic stock markets. The announcement was interpreted as a welcome letter to VIE companies, and the anticipated regulatory changes are expected to eventually allow VIEs to list on domestic stock markets.

Large VIEs like Alibaba, Baidu, JD.com and Sina are thrilled by this news, as are smaller internet enterprises. Shortly after the State Council’s announcement, P2P platform Qufenqi published an internal letter about its plans for a domestic IPO. Qufenqi focuses on providing college students with financing for electronic products. According to the released letter, the platform has provided loans to over 8 million students for purchases of cell phones, computers, photography gear and all kinds of other electronics.

P2P platform Huarongdao received RMB 130M investment

Founded in June 2014, Huarongdao focuses on trading offline lease assets. Most assets are originated by third-party leasing companies and yield maximum 13% annual returns to investors. According to its website, Huarongdao manages RMB 1.5B and has 380,000 registered users.

Two investors participated in this round of financing, Korea-based MJB and Chinese finance company Xueqiu. MJB stated that it sees similarities between its business model and that of Huarongdao, and believes the investment can be a gateway to the China market. Xueqiu has stated that it finds the team and unique business model attractive.

Online insurance sales platform Little Umbrella received over RMB 10M Series A Investment led by Sequoia Capital

Founded in January 2015, online platform Little Umbrella (LU) focuses on providing insurance products with discounted prices. LU uses big data analysis to pinpoint the need of each customer group and provides customized insurance products. In 2015, the company partnered with many major insurance companies including Ping An, PICC, China Life and CPIC. The platform currently offers insurance products to seniors, youth and adults for traveling, sports and corporate benefits. In addition to insurance sales, LU also provides an online claims service.  

The Series A Investment was led by Sequoia Capital, followed by a previous round’s investor Av Capital. The exact amount of the investment was not disclosed, but it is believed to be over RMB 10M. LU’s start-up team consists of members who come from Tencent, Ping An Insurance and CPIC. 

Fintech media platform JPM.CN received RMB 50M Series A Investment

Founded in June 2014, JPM.CN (http://www.jpm.cn/) is an online media platform focused on fintech news. It provides professional commentary, and most content is purchased or crowdsourced from academics, entrepreneurs, technical experts and mainstream journalists all over the world.

On December 29, JPM announced that it had received an RMB 50M Series A Investment from Guangdong Cultural Investment Fund (SOE), Everest Ventures and other crowdfunding investors.

P2P platform Weijinsuo received RMB 300M Series A Investment from HNA Capital

Founded in November 2013, Weijinsuo focuses on offline assets provided by mortgage companies, guarantee companies and other small credit institutions. Its key competency is considered to be providing a standardized creditrating system for small businesses to help them control risk, a practice common at commercial banks and which assigns corporate credit scores to borrowing institutions. The parent company Zhongwei Credit has been specializing in collecting, assessing and managing corporate credit since 2010. Weijinsuo has taken advantage of its parent company’s experience and data in corporate credit to mitigate risks. According to its website, Weijinsuo manages RMB 4B in investments and has 700,000 registered users.

The RMB 300M Series A investment was made by HNA Capital, financial subsidiary of Hainan Airlines operating in investment banking, leasing, insurance, trust, securities, futures, funds, private equity, factoring services and now fintech.