Top25-SA-Banner
Don Dion

About the Author Don Dion

Don Dion is the owner and Chief Investment Officer of DRD Investments, LLC, based in Naples, FL. and Williamstown, MA., a family office focused on managing a long/short hedge fund, real estate assets and various other financial assets for the Dion family. Don no longer manages money for other families or institutions. Mr. Dion is also the trustee of the Dion Family Foundation which focuses on helping individuals with tuition assistance at Catholic Institutions for grammar school, high school and college education. The foundation also helps individuals by supporting health care institutions particularly Massachusetts General Hospital. Don is on two leadership and advisory committees at Massachusetts General Hospital, consults with Saint Dominic's Academy and serves as a trustee of Saint Michaels College. Mr. Dion is the retired publisher of the Fidelity Independent Adviser (http://www.fidelityadviser.com/) family of newsletters, which provides to a broad range of investor commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 30,000 subscribers in the United States and 29 other countries, Fidelity Independent Adviser publishes two monthly newsletters and one weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 16 years and reaches over 25,000 subscribers. Mr. Dion is also the sole founder and retired C.E.O. of Dion Money Management (http://www.dionmm.com/), a fee-based investment advisory firm for affluent individuals, families and nonprofit organizations, where he was responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts and Naples, Fl., Dion Money Management managed over $900 million in assets for clients in 49 states and 11 countries when he sold the company to Focus Financial Partners in September of 2007. Mr. Dion was the co-founder, Chairman and C.E.O. of Litchfield Financial Corp. "LTCH" a NASDAQ listed company which went public in 1992 and was acquired by Textron Corp. in 1995 for cash consideration. Don was also the Executive Vice President, C.F.O. and General Counsel for Bluegreen Corp. "BXG" a NYSE company from 1986 to 1988. Mr. Dion graduated with honors from Saint Michaels College in 1976 with a B.S. degree in Economics and Business Administration. He received his J.D. degree from the University of Maine Law School in 1979 and his LL.M. degree from Boston University Law School in 1982. After law school, Mr Dion was employed as a tax and estate planning lawyer with the Boston Law Firm of Warner and Stackpole from 1983 to 1985 and Ernst and Young as a C.P.A. from 1979 to 1983

Short Opportunity: LexinFintech Holdings (LX)


The 180-day lockup period for LexinFintech Holdings (NASDAQ:LX) ends next Tuesday on June 19, 2018. When this six month period ends, the company’s pre-IPO shareholders will have the opportunity to sell currently restricted shares. Just 7.3% of LX shares outstanding are currently trading pursuant to the IPO.

The potential for a sudden increase in the volume of shares traded on the secondary market could negatively impact the stock price of LexinFintech.

There is still time for aggressive, risk-tolerant, investors to get short ahead of this event.

Business Overview: Online Consumer Financial Products Platform in China

LexinFintech Holdings offers consumer financial products online through its platform in the People’s Republic of China. It operates its online consumer financial platform known as Fenqile, which offers installment purchase loans, personal installment loans, and other loan products. In addition, the company offers its Le Card credit line. It pairs consumer loans with a range of diversified funding sources such as individual investors over its Juzi Licai electronic investment platform and institution partners through direct lending programs.

Through September 2017, LexinFintech had approximately 6.5 million active consumers with approved credit lines. They also had more than 20 million registered users. The company focuses on young, well educated adults between the ages of 18 and 36. This consumer base in China has high income potential, high consumption needs, high education backgrounds, and a desire to build a strong credit profile. Through September 2017, this consumer group comprised more than 90% of LexinFintech’s customer base.

Since its inception, the company has cumulatively originated $9.0 billion in loans. For the nine months through September 30, 2017, LexinFintech originated $4.7 billion in loans for an increase of 124% over the same period the prior year.

The company was formerly named Staging Finance Holding Ltd. It became LexinFintech Holdings in March 2017. The company has approximately 2,600 employees and keeps its headquarters in Shenzhen, China.

Financial Highlights

LexinFintech Holdings reported the following financial highlights (in RMB) for the first quarter ended March 31:

  • Operating revenue was RMB1.6 billion for an increase of 56.7%
  • Gross profit was RMB412 million for an increase of 52.2%.
  • Net income was RMB146 million for an increase of 160%.
  • Total loan originations reach RMB14.8 billion for an increase of 98.3% compared to the first quarter of 2017.
  • Total outstanding principal balance on loans was RMB21.3 billion for an increase for 99.3%.
  • Total registered users was 26.4 million for an increase of 94.8%. Consumers with credit lines was up 64% to reach 8.2 million.
  • Active consumers using loan products increased 39.2% to reach 2.6 million. The number of new consumers using loan products was 0.44 million.
  • The 90 day delinquency ratio was 1.44%.

Conclusion

When the LX IPO lockup expires on June 19th, pre-IPO shareholders and company insiders will have the opportunity to sell currently-restricted shares of LX for the first time. This group of pre-IPO shareholders and company insiders includes a director and six corporate entities.

Since such a small percentage of shares outstanding are currently trading, significant sales of currently-restricted shares could flood the secondary market and cause a sharp, short-term dip in share price. Aggressive, risk-tolerant investors should consider shorting shares of LX during today’s session and tomorrow ahead of the June 19th lockup expiration. Interested investors should cover shares of LX either late in the trading session on June 19th or during the trading session on June 20th.

 

Disclosure: I am/we are short LX.