Issuer "working for" investment banks? QuantumPi's Hong Kong IPO raises only 5.8 million out of planned 10 million

Recently, QuantFin (2685.HK) has launched its IPO and is expected to be listed on the Hong Kong Stock Exchange on November 27.

This time it plans to globally offer 13,347,500 shares, with an IPO price range of 8.8-9.8 HKD per share.

Based on a mid-price of 9.3 HKD per share, QuantFin is expected to raise a total of 124 million HKD.

But embarrassingly, the net fundraising amount for QuantFin is only 5.8 million HKD.

More than 90% of the IPO proceeds are used to pay listing expenses, which amount to 117 million HKD.

Specifically, QuantFin hired six coordinators/financial advisors including CICC, CITIC Securities, Fosun International Securities, Futu Securities, Tiger Securities, and Fosun International Capital, which almost "drained" the fundraising amount.

"Projects that are hard to sell have very high fees. Some companies' listing expenses can account for more than 80% of the raised funds, but accounting for over 90% is really rare and a bit exaggerated," a South China investment banker told Xin Feng.

Such a high proportion of listing fees is the first case in this year’s Hong Kong IPO market. According to statistics from Wind, as of November 20 this year, among the 88 new stocks listed in Hong Kong, the listing cost ratio for Newman Think (2530.HK) was the highest, but still less than 40%.

From a business perspective, QuantFin’s fundamentals have indeed experienced some changes.

One of QuantFin’s core businesses is to provide matchmaking services for financial institutions via Yang Xiaomi, matching financial institutions with end borrowers who meet the customer standards for their financing services, which is similar to a financial intermediary.

This is because acquiring new customers and directing traffic is not easy for many financial institutions. Such matchmaking services essentially help terminal financial institutions to acquire loan clients.

But loan facilitation and marketing diversion businesses have always operated in a gray area.

As early as 2021, the Central Bank and other major departments jointly issued the “Interim Measures for the Administration of Online Marketing of Financial Products (Draft for Comments)” (hereafter “the Draft”), aimed at regulating online marketing of financial products and protecting the legitimate rights and interests of financial consumers.

The Draft stipulates that financial institutions may not entrust other organizations or individuals to conduct online marketing of financial products unless clearly regulated or authorized by law, regulations, rules, or normative documents; non-bank payment institutions may not provide marketing services for loans, asset management products or other financial products.

Although the Draft has not yet come into effect, it has indeed become a focus of regulatory attention during the IPO process.

For example, when Ucredit Group, self-proclaimed "China's largest technology service provider for financial intermediary institutions," was pursuing its Hong Kong IPO, it faced pointed questioning from the China Securities Regulatory Commission: "Does the company's business comply with the provisions of the 'Interim Measures for the Administration of Online Marketing of Financial Products (Draft for Comments)'? Please state the impact of these regulations on the company's sustainable operation."

Now, Ucredit Group’s prospectus has expired, and its Hong Kong listing is out of reach.

Perhaps to facilitate a smoother listing, QuantFin has divested this business.

Currently, QuantFin has ceased to provide matchmaking services (or loan facilitation and traffic diversion services) to financial institutions, and has pledged to relevant financial regulators in Mainland China not to undertake such business in the future.

"Previously, when loan facilitation and traffic diversion agencies rushed to list, the major motivation was not financing but credit enhancement. Now, it seems that using a public listing as a credential has become much more difficult," said a person at a Beijing financial institution.

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