China Rapid Stock SkyRockets 14% on Microcredit License Approval

Chinese loan facilitators are seeking ways to stay afloat and to comply with new regulatory demands.

Anthony Russo
    Dec 18, 2019 4:00 PM  PT
China Rapid Stock SkyRockets 14% on Microcredit License Approval
author: Anthony Russo   

China Rapid Finance Ltd. (NYSE: XRF) announced on Wednesday that its micro credit company has received approval for a license from the local regulatory annual compliance review, sending its shares soaring 14% to close at $2.07 apiece.

XRF, which has been shifting away from peer-to-peer lending to other financing options, said in a statement today that the crackdown on the sector by regulators leaves microfinancing as an "attractive alternative."

"While some micro credit companies are required to undergo rectification, and some are forced to close, we are very pleased to receive a clean approval from the regulator's annual compliance review in our transition into our new business direction. The management team believes in the Company's prospects, and some plan to buy the Company's stock in the open market," Zane Wang, the founder, chairman and chief executive officer of the XRF, said in a statement today.

Another Chinese lending platform, Weidai Ltd. (NYSE: WEI), announced last week that it is also attempting to secure a microcredit license in an attemp to stay afloat in the country's heavily regulated financing sector.

The transitions came after China's Internet Financial Risk Special Rectification (CIFRSR) Work Leadership Team Office demanded that Chinese peer-to-peer lenders transform into small loan providers within two years, as Reuters reported last month. The regulatory office was established by Beijing to mitigate risks in the online lending sector, according to the report.

As a result of the tightened regulations within the past few years, just 427 P2P companies were operating in China as of October compared with 6,000 in 2015, according to the South Morning China Post.

XRF also said today that several members its management team plan to buy the company's stock during the open trading window. 

Earlier this week, the company announced that it is considering implementing a stock buyback program.

In its third quarter financials, Shanghai-based China Rapid reported revenue of $32.5 million, down 43% year-over-year. Net loss narrowed to $22.8 million, or 34 cents per ADS, compared with $51.8 million, or 79 cents per ADS, the company said.