Marketplace Lender China Rapid Finance closes 11% over opening price in US Debut

With over 10.7 million consumer loans issued to over 1.4 million individuals since its inception, China Rapid Finance is one of the largest loan marketplaces in Asia. The company was founded in 2001 by current CEO Zane Wang who believes in tapping into the middle-class credit market.

The Shanghai, China-based financial conglomerate has over 3,000 employees on its payroll. It mainly caters to the working class in the Chinese consumer market. Even with its debut in the US market, the company has expressed no interest in expanding its market base to North America.

The terms of the offering for the Chinese firm were straightforward. The firm would list under the stock label XRF on the New York Stock Exchange. It planned to sell off 10 million American Depository Shares at a price spectrum with $11.50 on the high side and $9.50 on the lower side. China Rapid Finance would have made a $105 million claim in revenue with these terms. However, the company experienced a surge in investment as its shares sold off at +6.7% on the first day alone. By the end of its IPO, the China-based company had +27.5% in returns from the IPO.

The company has so far operated on monies gained from its operations as well as funding from Chinese investors. Shareholders such as China United SME Guarantee Corporation and Broadline Capital have pooled significant funds into the firm, allowing it to grow and to sustain larger market bases. Similarly, these investors have been responsible for China Rapid’s debt coverage and attractive business prospects.

Entry into the US market will not change the operations of the company substantially. For one, the company issued a statement on Monday confirming that though the issuance had been held in the US stock market, it planned to use any revenue to expand its Chinese consumer market, not start one in the US. Mr. Wang said that the company would use the funds to lower its operating costs by going macro. Economies of scale would help China Rapid Finance to ‘strengthen its business relationships with Chinese consumers.’

With the successful launch of its issuance, China Rapid can now reach more of its Emerging Middle-Class Mobile-Active (EMMAs) customers. Wang said that China, unlike the US, did not have sufficient infrastructure to cater to almost-prime candidates for consumer loans. That’s why the working population with access to mobile banking facilities but no credit history is the target market for China Rapid Finance, he added.

CRF acts as a go-between that links EMMAs looking for loans with investors who want to put their money into potentially profitable ventures. Using technology, EMMAs are able to get loans directly from an online investor funding pool backed by investors and operated by China Rapid Finance. The loans are gotten directly from investors, making them way cheaper  when it comes to lower borrowing rates than those from Chinese banks. These peer-to-peer money lending has enabled the growth of many firms within the Chinese market. And as things stand, it’ll continue for many more years.

The joint managers for the company’s IPO were Morgan Stanley, Credit Suisse, and Jeffries LLC.