Chinese wealth management unicorn Lufax Holding is selling American depositary shares (ADSs) in an initial public offering (IPO) on the New York Stock Exchange that could potentially be the biggest US listing by a Chinese issuer this year.
The company, which is owned by Ping An Group, China’s biggest insurer, and is among the country’s top three online wealth management platforms with more than 12 million active users, is selling 175 million ADSs at an indicative price of between US$11.5 and US$13.5 per share, according to a filing with the Securities and Exchange Commission on Thursday. Each ADS presents 0.5 ordinary shares.
If Lufax is successful in pricing the deal at the top end of the range, its IPO will exceed the US$2.1 billion raised in August by KE Holdings, an online real estate platform backed by Tencent and better known in China as Beike Zhaofang. At a maximum of US$13.5, Lufax could raise up to US$2.4 billion.
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The IPO comes amid increasing threats from Washington about decoupling its economy from China’s. This has prompted 10 Chinese technology companies listed in the United States to seek secondary listings in Hong Kong this year. Such flotations have raised a combined US$15.4 billion, according to Refinitiv data.
There is an overallotment option to sell up to 26.25 million more shares to meet additional investor demand. Goldman Sachs, Bank of America, UBS, HSBC and China PA Securities (Hong Kong) are lead underwriters for the deal. The company plans to list under the symbol LU.
Ping An opted for the US instead of Hong Kong or Shanghai for the Lufax IPO because it wants to achieve a better valuation and have more exposure to US institutional investors, said two sources familiar with the matter.
Lufax entered the Hong Kong market in August and set up Lu International (Hong Kong) to sell fund products for large fund houses such as BlackRock and Fidelity on its online platform.
Its listing might coincide with Ant Group’s dual IPOs in Hong and Shanghai next week, but stockbrokers said that would not be a problem.
“The will be some overlap, but the overall client demand … will be different,” said David Friedland, managing director for Asia-Pacific at Connecticut headquartered Interactive Brokers. The company operates in 135 markets worldwide, including Hong Kong.
The workings of the listings are also different. While Hong Kong allows retail investors to borrow money to subscribe to IPOs and the leverage ratio is very high, this is not the case in the US, where IPOs also have shorter settlement cycles, locking up client money for a day against five in Hong Kong, Friedland said. As such, the IPOs will attract different pools of investors, he added.
Lufax plans to use the net proceeds from the listing to improve its technology infrastructure, product development, global expansion and sales and marketing activities, according to its prospectus.
The Shanghai-based fintech giant had facilitated retail credit totalling 519.4 billion yuan (US$77.8 billion) as of the end of June, connecting 13.4 million cumulative borrowers with more than 50 banks, trusts and insurers on its platform.
For the six months ended June 30, Lufax’s net profit stood at 7.3 billion yuan, down 2.8 per cent from 7.5 billion yuan during the same period a year ago.
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