OneConnect Sees Rebound After Disappointing IPO

China’s cloud-based FinTech platform OneConnect is rebounding after a tough ending to 2019.

The company, which provides technology solutions to boost revenue and manage risks for small- and mid-size financial institutions in China, is one of a few Ping An Insurance businesses backed by SoftBank. OneConnect has raised $650 million in funding, with a valuation of $7.4 billion.

OneConnect was forced to slash December’s planned U.S. initial public offering (IPO) by nearly 50 percent after reporting a net loss of $147 million on $218 million in revenue over three quarters. Instead of its 36 million shares selling for $12 to $14 a piece as originally planned, the company is expecting to sell 26 million shares for $9 to $10 each. This setback will result in OneConnect only being able to raise as much as $260 million rather than the $504 million they had hoped to tap into.

A report from Insider Monkey revealed that OneConnect shareholders saw a recent decline in activity from the world's largest hedge funds, and that its stock did not find a place on the list of the 30 most popular hedge fund stocks. In fact, only a select few fund managers sold off their entire stakes in the company last year. The largest stake in the company was held by Millennium Management, holding $0.5 million worth of stock by the end of September.

There is some good news, though: The company recently reported strong Q1 2020 results, with revenue increasing 29.6 percent year-over-year to RMB 581 million from RMB 448 million. Revenue from third-party customers increased 50.4 percent year-over-year to RMB270 million from RMB179 million, expanding the gross margin to 34.8 percent from 28.5 percent.

“OneConnect’s first quarter results demonstrated the strength and resilience of its platform amidst unprecedented challenges. We achieved revenue growth of close to 30 percent year-over-year, overcoming many of the disruptions caused by COVID-19. While some transaction activities did slow down, we believe the impact will only be temporary,” said CEO Ye Wangchun.

He added that the pandemic has caused financial institutions to rethink their IT strategies, which led to a 50 percent increase in revenue from third-party customers.