Although shares tumbled in the years following its IPO, Min Luo’s Qudian could be on the upswing.
Before founding Qudian, Luo was vice president of marketing at OkBuy.com, a Chinese online apparel and shoe site. Before that, he was the founder of Jiyiri.com, an online birthday-related service provider, and co-founder of dipian.com, a platform for college students.
In 2014 he launched Qudian, a platform that uses big data-enabled technologies, such as artificial intelligence and machine learning, to provide loans for small businesses and individuals who have difficulty securing credit from Chinese banks. The company raised about $873 million from a number of investors, including Alibaba’s Ant Financial.
The company raised $900 million in an initial public offering in 2017, but saw its share price fall from an IPO price of $24.9 to just about $1.50 in May 2020. The initial downfall was due to suspicions that Qudian had inaccurately described its business operations before the IPO, with the company’s prospectus putting its bad-loan ratio at 0.5 percent. However, the actual bad-loan rate was thought to be higher because the company might have written off delinquent loans as charity payments to borrowers.
In addition, the prospectus did not advertise a clear pre-IPO fundraising figure, and also stated that about “90.8 percent of active borrowers are between 18 and 35 years of age,” which Chinese media pointed out was most likely to include students. That was problematic, as China had banned online student loans after various financial scams.
The company also had unsuccessful ventures in the car-purchase financing and e-learning markets. By May 2019, Ant Financial had dumped its entire stake in Qudian.
But there does seem to be some good news on the horizon: In the last quarter, the firm reported a profit of $121.77 million, and saw revenues increase to $135.28 million. In late March, it also launched Wanlimu, a luxury eCommerce platform offering a wide range of high-end products for Chinese customers.
That has helped move Qudian’s share price by 3.61 percent over the past three months, with it currently trading at 1.72. There are now nine analysts covering the stock, with an average target price of 11.05—a potential upside of 475.5 percent.