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Exits, Private Equity

Tencent-Backed Auto Finance Platform Yixin Plans $6.77B HK IPO Despite Losses

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China’s largest online automobile financing platform Yixin Group, backed by investment heavyweights Tencent Holdings Ltd, Baidu Inc., JD.com and BitAuto Holdings Ltd, plans to raise up to HK$6.77 billion (US$867 million) via an initial public offering on the Hong Kong Stock Exchange.

The company plans to offer 878.7 million share at a price range of between HK$6.6 to HK$7.7 apiece, according to its IPO prospectus. The deal could value Yixin at as much as US$6.5 billion if the shares price at the top of their range. The valuation has raised some eyebrows given the company has been in operation for only three years, has a business model that is still in transition and lacks profitability.

Yixin recorded revenue of RMB1.48 billion (US$220 million) in 2016 and RMB1.51 billion (US$230 million) in the first half of this year, up 448% and 248% respectively. However, it reported a net loss of RMB6.1 billion (US$920 million) as in the first half of this year, compared with a net loss of RMB647,000 (US$97,000) during the same period last year.

The IPO would mark a significant exit for Yixin’s major investors. But a review of the IPO document raises questions about how much the company actually raised as a private company. In May, Yixin said it received US$580 million in a funding round from investors including Tencent, BitAuto and IDG Capitalat. However, according to its IPO prospectus, the company actually raised only US$505 million at that time.

Despite the companies losses and limited track record, the IPO is expected to receive active investor support. Several brokerage houses in Hong Kong have reportedly prepared margin financing of over HK$58 billion to help investors subscribe to its shares.

Founded in 2014, the start-up partners with financial institutions and provides a number of automobile financing products including loans for new car and secondhand car, car leasing, car insurances and credit cards for vehicle owners. The company says it has provided services to more than 100 million users in over 300 cities in China. As of the end of the first half this year, it had facilitated a total of 160,000 automobile retail transactions, up 87.6% year-on-year, the company claims.

Once Yixin completed the listing, it will be spun off from its controlling shareholder BitAuto, a Chinese vehicle content platform listed in New York Stock Exchange, with a market cap of US$3.40 billion, and will continue to operate under a separate brand.

Yixin raised a US$550 million series B round from Tencent, JD.com and Baidu, in October 2016. One year prior, it also completed a US$390 million series A round from Tencent, JD.com and BitAuto.

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