OneConnect Financial Technology Co. Ltd. (NYSE: OCFT) has applied for a follow-on offering, seeking to sell 16.5 million American depositary shares. At Monday’s closing price of $20.15 per share, the offering would raise the Chinese fintech firm $332.5 million.
An entity of Ping An (HKEX: 02318; SSE:601318), OneConnect provides cloud solutions to enterprises in China's financial sector. In its filing Monday it said it aims to use the majority of the new capital to boost its technology. Another portion will go toward international expansion and strategic investments, and the rest will be applied for general corporate purposes.
The underwriters, Goldman Sachs (Asia) LLC and Morgan Stanley & Co. LLC, will have an option to acquire an additional 2.5 million ADS upon the offering, according to the filing.
OneConnect became publicly traded in New York in December in an initial public offering worth $347.2 million – below the $504 million the company targeted in pre-IPO filings but still one of the largest China listings in New York in 2019. Now, the company is looking to close the gap.
Last week, OneConnect posted strong financial results for the first half-year. It reported revenue growth of 40% year-over-year, to $191.8 million. Losses, meanwhile, widened 3% to $110.2 million in the six months through June as the company has invested in expansion and technology development.
In the second-quarter earnings call, OCFT’s chairman and chief executive officer, Wangchun Ye, noted the company’s international expansion in Abu Dhabi, as well as the launch of a pilot program in virtual banking by Ping An OneConnect Bank (PAOB) in Hong Kong.
“I would like to highlight that all the IT systems of PAOB will develop in-house. I don't know anyone else who would be ambitious enough to attempt this or who would have the technology know-how to make it happen,” Ye said.
In its filing on Monday, OCFT wrote, “As of June 30, 2020, we had served all of China's major banks, 99% of its city commercial banks, and 53% of its insurance companies, collectively reaching hundreds of millions of end-customers.”
Further, “Since our establishment in December 2015, our platform has supported Chinese financial institutions in serving approximately RMB2.0 trillion (US$0.3 trillion) of transactions for their end-customers. Through our platform, in the six months ended June 30, 2020, on a daily basis we facilitated over 185,000 anti-fraud checks, 4.3 million credit risk assessments, and the processing of over 13,000 auto insurance claims.”
China's financial services industry generated $2.2 trillion of revenue in 2019, OCFT said. Consulting firm Oliver Wyman, cited in the prospectus, estimates that the technology spending market for Chinese fintech firms was $26.3 billion in 2019, and is expected to grow at a compound annual growth rate of 20.5% by 2024.
On Tuesday morning, news of a follow-on offering sent OCFT stock down 5%, to $19.06 per American depositary share. Still, that’s nearly double its IPO level of December 2019.