Uxin IPO: A Struggling Leader
The largest used-car e-commerce platform in China, Uxin Ltd (Uxin), is listing today on NASDAQ. At one point, the IPO was targeting a possible capital raise of US$475mm based on an IPO Price of US$10.50-12.50/share, but news today suggests a deal downsized to $225mm, priced at US$9/share, almost 15% below the bottom of the range.
- Listing Date: June 27, 2018
- Broker Initiation: August 6, 2018
- Lock-up Expiry : December 24, 2018
Used Car Supply Chain in Plate Restricted Cities (Source: Roland Berger)
Aggregate Sentiment from Smartkarma IPs
Smartkarma Insight Providers have covered this IPO since June 5, 2018 and have generally been bearish on the deal.
- Leading Player in China Market, but Fierce Competition
Uxin has two business segments, Used Car (2C) and Auction (2B). In 2017 the company was China’s largest used-car e-commerce platform in terms of transactions and total GMV (Gross Merchandise Value)*. However, these metrics do not reflect the potential impact of increasingly well-funded competitors, and lack of popularity for Uxin’s mobile app versus these competitors. - Balance Sheet Flashing Red
While revenue has grown from 2016 to 2017, Uxin’s losses and cash burn also increased during this time. Defaulted loans and write-offs are continuing to rise rapidly; defaulted loans as a percentage of total loan principal has tripled from 2017 to 1Q18.
Uxin’s delinquency rates are also notably higher than listed peers: its M3+ delinquency ratio (for used-car loans) is higher than Yixin, its closest competitor, by 55 basis points. - Benefits from Strong Tailwind in the Market
The potential used-car market in China is large. China is the world’s second largest automotive market and could overtake the U.S. to become the world’s largest in terms of car parc, however used-car transaction volume as a multiple of new car sales was only 0.5 in 2017 (versus 2.4 in the U.S.). Uxin also benefited from 2016 policy reform; local governments lifted restrictions against used cars shipped to cities other than where they were registered, enabling Uxin to match local consumer demand across regions.
Key Contributors
Ke Yan
Top 5%
IPO, Placements and Holding Companies, Smartkarma
Bullish View (June 5, 2018)
Bearish View (June 22, 2018)
Ke Yan believed “the company can make better lifetime value out of each transaction by taking up the loan on its balance sheet.” Despite belief that the company will continue to grow, he was most recently bearish on this deal.
See all Insights from Ke Yan starting with Uxin (优信) IPO: Thoughts on Valuation and Sentiment.
Blue Lotus Research Institute
Top 5%
China TMT Research
Bearish View (June 9, 2018)
An IP from Blue Lotus Research Institute was pessimistic the company’s growth, since “IPO is not the end of the game”.
See all Insights from Blue Lotus Research Institute starting with What Should Uxin Do After Its IPO?.
Arun George
Top 5%
IPOs & Technology analyst, Global Equity Research Ltd
Bearish View (June 11, 2018)
Arun found this upcoming IPO worrying, based on his close examination of its competitive positioning and financials.
See all Insights from Arun George starting with Uxin IPO Preview: Warning Lights Flashing.
