Hexindai (HX) Stock Skyrockets on Strategic Investment News
Chinese consumer lending company Hexindai (HX) announced a strategic investment in what it only describes as a “target company” that is well-known in China. The company also announced a $25 million share buyback program. Together, the news has contributed to HX soaring as much as 50% in Monday’s trading session, even though investors don’t know the exact details of the transaction.
Under the agreement, HX will generate revenue through participating in the target company’s peer-to-peer lending platform. HX CEO Xinming Zhou is “happy” about this “strategic cooperation”, saying it creates a “great opportunity for us to leverage our strong borrower acquisition and loan development capabilities to generate additional revenue.”
Additionally, HX reports that the buyback initiative “aligns with the company’s commitment to maximize shareholder value and affirms its confidence” in the company’s long-term future. HX does not guarantee the number of shares that will be repurchased and says it can discontinue purchases “at any time.”
Zhou has also recently stated, “This quarter was certainly challenging for us and the entire P2P sector as the overall market environment shifts around us. The industry is gradually weeding out firms who are financially weaker, fraudulent or unable to maintain compliance standards leaving only the best run remaining. One of the strategic pre-emptive steps we took during the quarter to stay one step ahead of the industry was to protect our existing investors as liquidity in the market tightened and demand for loan transfer products increased. In response, we reduced new loan offerings on our platform and placed a priority on promoting loan transfer products to increase their liquidity and meet the growing demand. While our top line decreased significantly as a result, these steps helped strengthen confidence in our platform and the loyalty of existing investors.”
The Beijing-based company was founded in 2013 and went public in early 2017. The company has lost more than 85% of its value since its debut on the NASDAQ and was trading at an all-time low before today’s news. The company grew revenue nearly five-fold between FY17 and FY18; however, in Q2 FY19, revenue decreased 82.9% from the previous period as total loan volume facilitated decreased 87.4% in that same time timeframe.