Chinese micro-loan lender Qudian has agreed to buy $100 million worth of shares in Secoo Holdings, making it the Chinese luxury e-retailer’s largest shareholder with a 28.9% stake.
Why it matters: Buying into Secoo could help struggling Qudian resuscitate its consumer lending platform by expanding to luxury e-commerce consumers.
- Expansion to online sales of costly luxury products could help lure customers into Qudian’s financial system.
- Qudian rolled out Wanlimu, a luxury online retailer site, in March. The platform quickly gained momentum with heavy discounts and aggressive marketing tactics.
- However, many remain skeptical of the high-end beauty products sold on the platform at bargain basement prices, a red flag which has in the past signaled either counterfeit products or a problematic business model.
Details: New York-listed Qudian has agreed to purchase more than 10 million newly issued Class A ordinary shares of Nasdaq-listed Secoo for an aggregate purchase price of up to $100 million, or a per-share price of $9.80, according to a joint statement released on Wednesday.
- The two companies will enter into a strategic partnership to cooperate in the online luxury e-commerce sector.
- The cooperation will cover various areas such supply chain management, user acquisition and retention, quality appraisals, post-sales services, and financing solutions, according to Qudian founder and chairman Luo Min.
- The partnership will bring value to both Secoo and our Wanlimu platform, Luo said.
- Secoo will use the investment proceeds to further strengthen its supply chain and enhance user experience, Secoo founder and chairman Li Rixue said in the statement.
- In response to the news, Qudian shares rose 4.7% and Secoo shares soared 52.6% on Wednesday.
Context: Six-year-old Qudian started out as a consumer credit firm. It raised $900 million in its 2017 stock market debut, then the biggest US IPO by a Chinese fintech firm.
- A government crackdown on microlending has weighed on the company’s performance since its stock market debut. The company saw its market value plummet from around RMB 10 billion just after its IPO to just RMB 433 million as of Wednesday.
- Alibaba’s Ant Financial, an early backer, dumped its entire stake in the company in 2019 after it ended its partnership in 2018.