JD’s Fintech Arm Likely to Withdraw China IPO, SCMP Says

(Bloomberg) -- JD Technology, the fintech unit of Chinese e-commerce giant JD.com Inc., is likely to withdraw its application for an initial public offering on Shanghai’s technology-heavy Star Market, the South China Morning Post reported, becoming the latest casualty of China’s wide-ranging crackdown on the country’s sprawling online finance industry.

JD Technology, formerly called JD Digits, was renamed after absorbing JD’s artificial intelligence and cloud businesses earlier this year. It is considering withdrawing the listing because of “changing business circumstances” after China halted Ant Group Co.’s massive stock offering in November, the SCMP said, citing two anonymous sources.

The company was looking into raising an estimated 20 billion yuan ($3 billion), the report said, and may resubmit a new listing application in the future. JD.com shares dropped 5% in Hong Kong on Monday. A representative for the company couldn’t immediately comment on the report.

China’s fintech industry has faced increasingly tighter scrutiny from Beijing since the introduction of new regulations on consumer lending in November which led to the abrupt suspension of Jack Ma’s Ant’s planned $35 billion debut in Hong Kong and Shanghai.

The regulatory crackdown forced fintech companies to rethink their IPOs and raise cash to comply with the rules requiring online lending companies to provide 30% of funding for loans. Previously, companies like Ant and Lufax Holding Ltd., the fintech arm of Ping An Insurance Group Co., only kept about 2% of their loans on their books.

Read more: China’s Fintech Giants Scramble to Rethink IPOs, Raise Cash (1)

Beijing-based JD Technology had filed for a Shanghai IPO in September, but those plans had since been thrown into doubt as the company weighed changes to its plans, Bloomberg News reported. At the end of December, it elevated its chief compliance officer to the role of chief executive to handle the heightened scrutiny.

Lufax Holding Ltd., which went public in New York at the end of October, just before Beijing launched its crackdown, had warned investors before its IPO that it planned to increase the proportion of loan risk it bears with lending partners to 20% from 2% because of regulatory trends.

Its share price has seen some violent swings since listing and has dropped almost 13% since Feb. 16. It is, however, still trading 12.7% above its IPO price.

(Updates with company comment in third paragraph)

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