X Financial (XYF) Accused of Misleading Investors in IPO
According to the complaint for alleged violations of the Securities Act of 1933 pursuant to its September 2018 initial public offering (“IPO”), X Financial (XYF) completed its IPO on September 19, 2018, offering 11.7 million American Depositary Shares (“ADSs”) at $9.50 per ADS and raising more than $111 million in gross proceeds. In its Registration Statement, X Financial touted that the increase in borrowers for its Xiaoying Preferred Loan “will drive continued growth in borrower base” and that the Company had “experienced significant growth in the amount of loans facilitated.” Despite its positive forward-looking statements, in November 2018, the Company’s financial results for third quarter 2018 revealed a 40% sequential increase and 270% year-over-year increase in the delinquency rate for X Financial loans and a 35% year over year and 21% quarter over quarter reduction in loans facilitated. Then on April 25, 2019, X Financial disclosed in its annual report for 2018 on Form 20-F that there had been a dramatic increase in delinquency rates leading up to and during the IPO and that these negative trends were accelerating. By November 22, 2019, X Financial’s ADSs closed at $1.74 per ADS, representing an 80% plummet from its IPO price.
