Stock of 360 Finance Tumbles on Investigation, CEO Resignation

The investigation by a law firm against the Qihoo-backed financial account platform was announced on the same day that 360 Finance posted strong results for the second quarter.

Belinda Zhou
    Aug 23, 2019 10:00 AM  PT
Stock of 360 Finance Tumbles on Investigation, CEO Resignation
author: Belinda Zhou   

The stock of 360 Finance Inc. (Nasdaq: QFIN) declined 6 percent midday Friday on news of the resignation of its chief executive officer and on a law firm's announcement of launching an investigation into the company. 

A California shareholder rights litigator, Johnson Fistel LLP, called on shareholders of 360 Finance to contact the firm as it has begun investigations against the consumer finance platform 360 Jietiao for violations of federal securities laws Friday. The law firm said the company's stock price has plummeted from its issue price of $16.50 since the initial public offering and the resignation of CEO.

Johnson Fistel said its investigation "seeks to determine whether the Company's filings with the U.S. Securities and Exchange Commission in connection with its December 2018 IPO and subsequent investor communications contained untrue statements of material facts or omitted to state other facts necessary to make the statements made therein not misleading concerning the Company's business, and operations."

360 Finance has appointed Haisheng Wu as its new CEO in place of Jun Xu, who has resigned for personal and family reasons, according to the company's Friday statement. He has resigned from his position as the chief executive officer and from all other managerial positions held by him, effective Aug. 23, it reported.

The news, which plunged 360 Finance's stock to $9.97 per American depositary share, was released on the same day that the company reported revenue for the second quarter that has more than doubled.

The Shanghai-based company, backed by Qihoo 360 Technology Co. Ltd., reported that its revenue for the quarter ended June reached $324.4 million, up 128 percent from a year earlier. 

The consumer finance platform said its loan origination volume reached 48.4 billion yuan, or $6.9 billion in the second quarter, representing a 127 percent increase from that of 2018. 360 Finance relies mainly on institutional funding to facilitate loans, with the percentage of funding from financial institutions of 85 percent.

Its net income reached $90 million, or 30 cents per fully diluted ADS, marking its profitability in contrast to a net loss a year ago.

"Our strong business development is primarily driven by our expanding user base and continuous investment in advanced technologies such as big data and artificial intelligence," Haisheng Wu, the new chief executive officer of 360 Finance, said in a statement today.

Apart from its technology-driven business model, 360 Finance emphasized its overseas expansion. "We are actively exploring opportunities to extend our fintech services to select international markets such as Southeast Asia and South Asia," Wu said.

Looking ahead, 360 Finance has issued a flat revenue estimation, saying it expects to generate net revenue for the full year 2019 in the range of 8 billion yuan to 8.5 billion yuan.

"We are pleased to welcome Haisheng Wu to join the board and act as the chief executive officer and to benefit more from his talents and experiences as we continue to sustainably grow our business and deliver long-term shareholder value. We will continue to dedicate our efforts to building the Company into a data and AI driven third-party financial technology enabler," Hongyi Zhou, the chairman of QFIN's board, said Friday.

Wu has served as the president since the inception of 360 Finance with work experience in 360 Group and Baidu Inc. (Nasdaq: BIDU). "The experience of working together over the past few years has enabled me to see Haisheng's insight into strategy, business understanding and action on innovation. He is the most suitable leader in the 2.0 era for 360 Fnance," the former CEO Xu said in an internal letter.