Dow Jones – Dianrong.com, a Chinese online lending platform started and run by a co-founder of LendingClub Corp., is planning an initial public offering as soon as next year that could raise at least $500m, according to people familiar with the matter.
The Shanghai-based company is planning to list its shares in Hong Kong, the people said. Founded in 2012, Dianrong makes loans and sells investment products to individuals and small businesses and calls itself a Chinese pioneer in connecting investors with borrowers through its platform.
Dianrong’s American founder and chief executive, Soul Htite, co-founded US-based LendingClub in 2006. The two companies have similar business models, and Dianrong has in the past described itself as the “LendingClub of China,” though the two companies aren’t directly connected. Mr. Htite used to be head of technology at LendingClub and left in 2011 before the San Francisco-based firm went public.
Dianrong has raised several rounds of private funding, the most recent of which was a $220m capital raise announced in August from investors including Singapore’s sovereign-wealth fund GIC Pte Ltd. Other shareholders include Northern Light Venture Capital, Tiger Global Management LLC and the private equity arm of Standard Chartered PLC.
Online lending volume in China reached 1.2tn yuan ($181.4bn) in November, about 54% higher than a year earlier, according to data provider Wangdaizhijia. Dianrong previously said it issued 23bn yuan worth of loans in 2016 funded by more than 3.6 million investors.
The broader consumer finance industry, however, has come under increased scrutiny from Chinese regulators, who are concerned about a rise in risky lending practices and the potential for predatory lending behaviour among some companies.
Last Friday, the China Banking Regulatory Commission pledged to clean up lax lending practices among businesses that make micro loans, which are small, short-term loans that carry high interest rates.
The regulator said online micro lenders without proper licenses would be banned from operations, and announced caps on interest rates and financing fees. Guidelines issued last week capped interest rates on loans by peer-to-peer platforms and required these platforms not to collect charges like commissions and management fees.
Dianrong stopped making microloans in the past few months, according to a spokesman. “Earlier this year, Dianrong issued a very limited number of mini loans to test the viability and suitability of the product. We quickly determined that the underwriting costs were not sustainable and the loan purpose was difficult to confirm, so the product was discontinued.”
Dianrong could push back its listing plans if market conditions aren’t optimal, as the company isn’t in need of immediate cash, according to a person familiar with the situation. An IPO, however, could enable the company’s backers to monetise some of their shares and profit in what has been a hot market for IPOs in Hong Kong for technology-related stocks in the past year.