Bookrunners Bank of America Merrill Lynch, China Renaissance, Deutsche Bank and Goldman Sachs, along with co-manager ICBC International, started marketing the flotation on Thursday. The company is offering 12m primary American Depositary Shares at a price range of $9-$11 each, which will net the issuer $132m in proceeds if priced at the top of guidance.
This can be bumped up to $151.8m if the greenshoe option of 1.8m ADSs is taken up. Books will be open until December 20, when the listing will be priced.
LexinFintech’s US listing comes at a particularly difficult time for China’s internet-based consumer finance industry. This started in October when Chinese publication Caixin claimed the banking regulator was mulling stricter curbs on micro-lenders to clamp down on improper debt collection and the hefty interest rates they charge.
In early December, the People’s Bank of China and the China Banking Regulatory Commission issued a regulation to rectify excesses in internet-based consumer finance, which stopped any unlicensed firms or individuals from making loans.
In addition, it temporarily stopped internet-based platforms from making general purpose unsecured consumer loans and also banned loans to finance the down-payments of housing purchases and loans for buying stocks and futures. The moves were aimed at deleveraging the financial system amid fears of an escalation of debt levels.
The impact of those measures on the stocks of Chinese fintech names was immediate. A number of mainland firms that had listed in the US this year — such as peer-to-peer lender PPDAI Group and online micro-lending platform Qudian — saw their valuations take a hit.
That backdrop has already affected LexinFintech, which counts tech firm JD.com as one of its principal shareholders. When the issuer filed for its listing in mid-November, bankers close to the trade told GlobalCapital Asia the company was looking to raise around $500m. Its IPO launch size is around 3.5 times lower.
Nevertheless, bankers were confident LexinFintech would sail through without any hiccups, given that it is a high quality asset. Also, some of the firm’s existing shareholders have already indicated they are keen to take up to $28m of the ADSs on offer to the public. Specifically, entities of K2 Partners and JD.com Asia Pacific Investment will buy $3m and $10m of the ADSs, respectively, according to a prospectus filed by LexinFintech with the US Securities and Exchange Commission.
At the mid-point of guidance, or $10 per ADS, this is equal to 2.8m ADSs, or around 23.3% of the stock on offer in the IPO.
LexinFintech will use the listing proceeds for general corporate purposes, including investment in product development, sales and marketing, technology infrastructure, capital expenditure, improve corporate facilities and other administrative matters. Some of the funds may also go towards acquisition or investment in technologies, solutions or businesses that complement the issuer’s operations.
As part of the marketing process, the leads and the company’s management have organised lunch at the Island Shangri-La Hotel in Hong Kong on Thursday. On Friday, a lunch will be held at the St Regis Hotel in New York.
Next Monday the team will head to Boston, followed by San Francisco on Tuesday and back to New York on Wednesday (December 20) for the pricing.