Qudian Inc – ADR (NYSE:QD) shares plunged again on Tuesday following concerns over the integrity and the prospects of the troubled micro-lending tycoon. Qudian is also facing the risk of class-action lawsuits in the U.S. following claims that it misused user information and lends at usurious rates.
What’s pushing the stock down?
Faruqi & Faruqi, a New York-based law firm, is asking Qudian investors to join the lawsuit as it investigates “potential claims against” the company. The provider of online small consumer credit in China made its U.S. stock market debut on October 18. However, its shares have dropped over 40% from its intraday high of $35.
Qudian’s share price had been on a roller coaster ride since its IPO last month following reports that it is involved in selling user information and that the company is facing stricter regulations in China. According to local media report, personal information of about 1 million students was on sale on the black market. The price tag assigned was RMB 100k. There are reports that the information bundle was also sold based on province, and each bundle (representing a province) included tens of thousands of entries. “Data from Beijing, Shanghai and Jiangsu was priced at RMB8,000,” said a report from local media Yiben Caijing.
The data on sale includes information like names, addresses, phone numbers (including of parents and friends), accounts, loan size, etc. A former Qudian employee confirmed to Yiben Caijing that Qudian is the source of the leaked data. Further, the report notes that the leak is more likely to have come from an insider than a hacker as the data is saved in a CSV format.
That said, the investigation could further dampen the reputation of the three-year-old company. In its first quarterly report after listing on NYSE, the company reported that the revenue jumped over 300% from last year. For the third-quarter, the Chinese company posted a profit of $97.8 million, compared to $23.2 million in the same quarter last year.
Concerns Over China’s Payday Loan Industry
Speaking to South China Morning Pos, Chinese lawyer from Shanghai-based Bright & Young Law Firm – Wang Zhibin, said “The compensation scale of the class-action against Qudian could be much larger than in China, ranging from several millions of US dollars to even billions.” This is mainly due to the difference in the law systems in the two countries.
This recent allegation against Qudian is another major blow to the reputation of China’s payday loan industry. He Xin Dai, another P2P lender witnessed a drop in share price. The company made its debut on NYSE earlier this month, adding more than 60% on the first day. Further, PPDai, who also offer online microloans, dropped on Tuesday morning. The drop came following an urgent notice issued by the Chinese government, where it suspended the regulatory approval for new online microloan companies, according to sources who had seen the notice.