Shares of Qudian Inc. lost a fifth of their value in one day, as analysts say some investors have doubts about the business model of the newly listed Chinese online microlender.
On Monday, Qudian’s U.S. Depositary Shares (ADS) in New York City plunged 19.4% to $ 26.59. The company, which debuted last Wednesday, is still trading above its IPO price of $ 24. Qudian’s IPO at nearly $ 900 million is the fourth largest in the United States this year.
The plunge, analysts said, came after widely followed tech writer Cheng Lingfeng interviewed Qudian CEO Luo Jun.
Cheng’s report suggests that Qudian’s bad debt rate is likely above 0.5%, according to the company in its listing prospectus, analysts added.
In the interview, Luo was asked if Qudian charges high interest rates on his loans. “If the debts are past due, it’s bad debt for us,” he replied. “In that case, we won’t do anything to collect the debt, not even a phone call. If you can’t pay, we’ll just donate it to charity. “
A senior investor in the microcredit industry told Caixin: “It is not clear from the IPO prospectus why Qudian has such a low NPL ratio.
A source from the risk management department of BOC Consumer Finance Co. told Caixin, “The disclosed bad debt ratio is either calculated differently or the risk of bad debt has not been disclosed.”
Qudian started in 2014 offering small online loans to students. In July 2016, the company switched to white-collar loans after China banned online student loans following multiple financial fraud case.
Qudian has been profitable since early 2016, according to the listing prospectus. The company’s second-quarter revenue jumped 311% to 998 million yuan from a year ago, while second-quarter profits nearly quadrupled to 508 million yuan.
The IPO prospectus in 2016 showed that the annual interest rates on 59.5% of Qudian’s loans were above the legal limit of 36%. Luo responded in Sunday’s interview that Qudian has adjusted the interest rates on these products below the legal limit since April 2017.
A representative for Qudian did not comment on this story after being contacted by Caixin on Tuesday.
Contact reporter Leng Cheng ([email protected])
You have accessed an article available only to subscribers