New York-listed Chinese online micro-credit provider Qudian has entered into an agreement to invest over $100 million in Secoo, a Nasdaq-listed Chinese luxury products and services platform, to become its largest shareholder with a 28.9 per cent stake.
Qudian agreed to purchase an aggregate of 10.20 million newly issued Class A ordinary shares of Secoo at a price of $9.8 apiece, amounting to a transaction of slightly over $100 million, according to a joint statement on June 3.
The proposed investment comes after the once-booming Chinese online non-bank lending industry witnessed a steep decline, in the last five years, amid continued regulatory crackdown on the sector.
China’s Supreme People’s Court in October 2019 started to enforce an annualized interest rate cap of 36 per cent that it had introduced in 2015 for the country’s online non-bank lenders more rigorously, further drying up their revenue lifelines.
After its market capitalization fell from about $10.77 billion at its peak in October 2017 to lower than $390 million, Qudian marched into the luxury e-commerce space through the launch of the Wanlimu platform earlier this year to explore “new areas of growth,” said Luo Min, the company founder, chairman and CEO in Qudian’s first-quarter financial results.
As part of Qudian’s investment in Secoo, the duo plan to cooperate in the Chinese online luxury e-commerce market which, according to local research firm Yaok Group, has reached $7.5 billion in 2019 and is expected to increase over 50 per cent year-over-year (YOY) in 2020.
“This strategic partnership leverages both companies’ resources, capabilities, industry expertise and market presence while fostering collaboration in supply chain management, user acquisition and retention, quality appraisals, post-sales services, and financing solutions,” said Luo in the joint statement.
He said that the new partnership “will fuel opportunities for expansion and success” for Secoo and Wanlimu.
The transaction is expected to be completed in two separate closings, according to the statement. Qudian agreed not to sell transfer or dispose of any shares acquired in the deal for twelve months after the first closing, subject to certain limited exceptions.
Li Rixue, founder, chairman and CEO of Secco commented: “We believe this strategic partnership will enable us to accelerate growth by building upon both companies’ assets, core expertise and competitive advantages. We will utilize the investment proceeds to further strengthen the supply chain and enhance user satisfaction.”
Qudian, which raised $900 million in an initial public offering (IPO) in October 2017, registered 958 million yuan ($135 million) in total revenues in the first quarter of 2020, down 54.3 per cent from the same period in 2019.