P2P lending platform Dianrong seeks USD 100 million investment

With regulators cracking down, the vast majority of Chinese P2P lenders is expected to disappear. Dianrong does not want to be one of them.

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P2P lending platform Dianrong seeks USD 100 million investment

Once lauded by the US Department of Commerce as a leader in China’s peer-to-peer (P2P) lending market, Dianrong is looking to raise USD 100 million as it buckles in to ride out a regulatory storm, the Financial Times reports.

The funding would give the Shanghai-based company a buffer to meet the RMB 500 million (USD 74.5 million) capital requirement that Beijing has proposed to set for nationwide operators. Just seven of 1,021 platforms operating today meet this minimum, according to Bloomberg.

Mounting regulation to combat an industry fraught with fraud has left Chinese P2P lenders in tatters. Half of the country’s online P2P platforms closed down in 2018, and 70% of remaining players are expected to disappear by the end of 2019, according to estimated by research firm Yingcan Group cited by Technode.

Dianrong itself began downsizing its business last year. This March, the company laid off 2,000 employees — about a third of its workforce — closed 60 of its 90 brick-and-mortar stores and cut 2,000 jobs. Weeks later, it confirmed it was short of cash and needed to liquidate its assets, saying management-level staff hadn’t been paid in over two months.

To reassure investors, company co-founder Kevin Guo recently put $10 million of his own money into Dianrong. His co-founding partner, Soul Htite, also co-founded of US-based P2P lending company Lending Club.

Dianrong is seeking funds from new and existing investors. Current shareholders include Singapore’s sovereign wealth fund GIC, Japan-based financial services company Oryx, and the Asian private equity branch of Standard Chartered, one of Jack Ma’s family offices, the hedge fund Tiger Global, and Hong Kong-based Sun Hung Kai.

The firm has previously raised over a half a billion dollars and was valued at USD 1.2 billion (over RMB 8 billion) during its last round of financing.

Meanwhile, the Chinese government is expected to roll out a pilot program to register P2P lenders in the second half of 2019, beginning with the more developed parts of China, and eventually rolling out to the entire country by 2020.

Editor: Nadine Freischlad