Qudian IPO - VIE and Shareholders analysis

Looks like Qudian is all set to price above the $19-$22 range

Here are few important factors to consider -

  • VIE risk - 100% of the revenue comes thru variable interest entities

  • Though Qudian is backed by Ant Financial, there is a risk mentioned about future competition with Ant Financial worth analyzing further
    We may compete with the consumer credit business of Ant Financial. Ant Financial operates consumer credit businesses, such as Ant Credit Pay, or Huabei, and Ant Cash Now, or Jiebei. Similar to a credit card, Huabei allows its users to purchase goods and services on credit and charges them no interest if full repayments are made before the first due dates. Jiebei offers cash credit products of various amounts, including those that are significantly larger than amounts offered under our credit products. As such, Ant Financial’s consumer credit businesses may target similar potential borrowers as ours and compete with us directly. There has not been any material impact of such competition on our strategic partnership with Ant Financial, and we are in ongoing discussions with Ant Financial to explore other collaboration opportunities. In March 2017, we entered into an agreement with a subsidiary of Ant Financial which operates the Jiebei consumer credit business and began to engage borrowers through the Jiebei platform.
    However, there can be no assurance that potential competition with Ant Financial’s consumer credit business will not harm our strategic partnership with Ant Financial or that we will continue to be able to enter into additional collaboration with Ant Financial. We cannot rule out the possibility that the various services currently provided by Ant Financial to us will be limited, restricted, curtailed or less effective or more expensive in any way or become unavailable. Such changes could materially and adversely affect borrower engagement, availability of credit analysis information and other aspects of our business. We may also compete with other companies that collaborate with Ant Financial, and such companies may enjoy similar or greater collaboration with Ant Financial than we do, or may have greater financial, technical, marketing and other resources than we do. Competition with such parties may also adversely affect our business.
  • Top 5 principal shareholders (including Min Luo’s Qufenqi Holding Limited) account for about 95% of the voting power
  • Last but not least, the latest Bloomberg article on Ant Financial’s $23 billion ABS (Asset Backed Securities) sale need to be given consideration as well
    The firms are then packaging the debt into complex financial products that they then sell on to investors, with Ant Financial selling at least 149 billion yuan ($23 billion) of the so-called asset-backed securities this year.
    But the new practice is raising red flags for some analysts, who say there needs to be more transparency about how the securities, known as ABS, are created.