Huangpu District, Shanghai, China
Industry: Information Tech
Region: China 🇨🇳
Expected Valuation: $69 million
IPO Date: 2023 (expected)
FD Technology, Inc.
Key Company Facts
|Headquarters||Huangpu District, Shanghai, China|
|Number of employees||102|
|IPO Date||2023 (expected)|
|Number of investors||N/A|
|Number of account holders||218,000|
|Valuation estimate||$69 million USD|
Company Overview & History
FD Technology, a Chinese company based in Shanghai, was founded in 2016 with the purpose of developing a platform to enable people in China to pay over time for major costs such as weddings, education, and family health expenses.
The company provides a payment plan platform for industries including wedding, education, and family health in China. They offer marketing, intermediary, and technology services to merchants and financial institutions in these industries.
FD Technology operates its business through Shanghai Fendan, a People’s Republic of China operating entity. The Aifendan Platform, a product of FD Technology, is an interactive system where individual consumers are offered a “purchase before payment” option by merchants utilizing FD Technology’s services, which allows them to make installment payments through financing services provided by cooperating financial institutions.
As of September 30, 2022, the Aifendan Platform had over 218,000 registered consumers and 3,850 registered merchants, and the company had 12 cooperating financial institutions.
As of the last financial report, FD Technology had a market capitalization of $71.23 million, revenues of $9.56 million, and net income of $3.77 million over the last 12 months.
FD Technology operates by providing intermediary services and does not take credit risk. The company’s business model involves seeking merchants who want to offer their services via payment plans, financial institutions that provide credit, and consumers who seek to pay for products or services using a payment plan approach.
Their revenue sources are transaction fees, technology service fees, and marketing service fees, usually paid by either the merchant or the financial institution. FD Technology’s market includes the ‘buy now pay later’ services sector, which had a gross merchandise value of $86.9 billion in 2021 in China and is forecast to reach $353.9 billion by 20283.
The company intends to raise $17.5 million in gross proceeds from an IPO of its ordinary shares, offering 3.5 million shares at a proposed midpoint price of $5.00 per share.
Management has stated they will use the net proceeds from the IPO for the research and development of new services and technologies, equipment upgrade for their Aifendan Platform, marketing and brand promotion activities, acquisitions or investments in businesses similar or complementary to their business, new hires and employee training, and for working capital and other general corporate purposes.
FD Technology is a Chinese firm that provides a platform for ‘buy now pay later’ financial services. However, it faces several risk factors.
The company has reported contracting top-line revenue and is relatively small and thinly capitalized, with a proposed U.S. IPO of $17.5 million.
FD Technology acts as an intermediary and does not bear credit risk, which can be both a strength and a vulnerability, depending on market conditions.
The firm has attracted approximately $3 million in equity and debt investment from investors, including FD Creative Consulting, FD Entertainment, and Oriental FD Innovation. Its revenue sources include transaction fees, technology service fees, and marketing service fees, typically paid by either the merchant or the financial institution.
One notable concern is the negative Selling and Marketing efficiency multiple (-3.1x) in the most recent reporting period, indicating that each dollar spent on Selling and Marketing is failing to generate an increase in new revenue1.
The financial results show a drop in top-line revenue year-over-year and variable cash flow from operations. As of June 30, 2022, FD Technology had $4.8 million in cash and $1.6 million in total liabilities, with a free cash flow of $2.1 million during the twelve months ended June 30, 2022.
Finally, while there are no known ‘material, active, pending, or threatened proceedings’ against the firm, the landscape of financial regulations can change rapidly, especially in China’s tightly regulated financial sector.
Despite the risks, there are also significant market opportunities for FD Technology. According to a 2022 market research report, the Chinese market for ‘buy now pay later’ services is expected to grow from a gross merchandise value of $86.9 billion in 2021 to $353.9 billion by 2028, with a forecast CAGR of 19.9% from 2022 to 2028.
This growth is driven by increasing familiarity with cashless payment systems, online shopping, and e-commerce transactions. Furthermore, large e-commerce businesses have introduced their payment options, demonstrating to consumers the ease of use of payment plans.
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