Chinese fintech giant Lufax aims for $3 billion New York listing

Trade war and U.S.-China tensions be damned, Chinese fintech company Lufax (陆金所 lùjīnsuŏ) filed a prospectus yesterday to list on the New York Stock Exchange. The company “aims to raise about $3 billion in its initial public offering (IPO), which could take place as soon as the end of October,” according to people with direct knowledge of the matter cited by Reuters.

• The company says its “mission is to make retail borrowing and wealth management easier, safer and more efficient.”
• It aims to meet “the large unmet demand for personal lending among small business owners as well as salaried workers in China,” and to “provide tailor-made wealth management solutions to China’s fast growing middle class and affluent population.”
• Lufax says that as of September 30, 2020, its “total balance of retail credit facilitated reached 535.8 billion yuan ($75.8 billion),” and that the “total client assets generated through its online wealth management platform reached 378.3 billion yuan ($53.5 billion).

With funding from state-controlled insurance giant Ping An, Lufax was founded in 2011 as China’s peer-to-peer (P2P) lending industry was taking off.

• P2P companies allowed consumers to lend to one another and to SMEs, in theory offering credit to China’s huge unbanked population.
• By 2016, there were more than 2,000 P2P platforms in China. But many of them turned out to have unsustainable business models based on shell games of moving money about from bank savings accounts to opaque wealth management products. Some collapsed; investors lost money.
• The government began cracking down, in fear of a systemic meltdown, and Lufax began transforming its business model to what it now describes as “technology-empowered personal financial services.” At the end of 2018, P2P products made up 50.6% of Lufax total client assets; they now comprise only 12.8%.

Lufax joins a “China fintech IPO race with Ant and JD Digits” notes Nikkei Asian Review, with three companies together seeking to raise over $40 billion from investors in the coming weeks. Ant plans to list in Hong Kong, JD Digits has filed with Shanghai’s STAR market.

One unusual fact about Lufax: It’s the only major Chinese tech or fintech company whose CEO is not Chinese. The man with that job is an American, Gregory Gibb.