Fuyou Pay's Second Attempt at Hong Kong IPO
The Chinese third-party payment industry is currently dominated by a two-horse race between Alipay and WeChat Pay, with other platforms competing fiercely for a share of the remaining market. In this landscape, many smaller platforms are looking to go public to enhance their brand influence and solidify their positions in a market where they find themselves struggling to keep up. Among those aiming for a public listing is Shanghai Fuyou Payment Service Co., Ltd. (hereinafter referred to as “Fuyou Payment”), which has attempted to file for an IPO on the Hong Kong Stock Exchange (HKEX) more than once after an initial failed application.
Fuyou Payment, founded by industry veteran Chen Jian, has already made one attempt to list in Hong Kong this year. They filed their prospectus on November 8, marking the second time they have aimed to go public this year. The previous attempt, which began with a submission on April 30, 2023, was ultimately deemed invalid by October 30, 2023. The company aims not only to raise capital but also to leverage the public listing as a means of increasing visibility and improving competitive differentiation in a crowded marketplace.
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However, Fuyou Payment’s road to the stock market has not been without challenges. One notable point raised in the prospectus is that the company has no controlling shareholder, which has drawn increased scrutiny from regulators. This characteristic raises questions about governance and accountability, which are critical aspects for investors when considering investing in a publicly traded company.
Chen Jian founded Fuyou Group in 2008 after previous roles in academia and prominent Chinese financial institutions, including the establishment of China UnionPay. With Fuyou Group as its major shareholder, owning 52.72% of Fuyou Payment, the company has expanded its range to include services from payment processing to comprehensive financial solutions, including insurance brokerage. Despite the strong backing, the lack of a singular controlling entity puts Fuyou Payment in a precarious position—a scenario that could lead to governance issues or hinder decision-making efficiencies.
Currently, the company reports that 64 individual shareholders hold approximately 43% of its total shares, none of whom have controlling stakes exceeding 10%. This fragmentation has rendered the company effectively without a clear leader or decision-maker, igniting discussions in the regulatory realm about the potential impact this could have on the company’s strategic direction and stability. Legal experts, such as lawyer Wang Rengen from Sichuan Fenyou Law Firm, caution that companies functioning without a controlling shareholder may struggle with management challenges that can affect performance and stakeholder confidence.
Additionally, there are concerns surrounding the company's pre-IPO actions, specifically a significant distribution of dividends that some analysts have termed a “liquidation-style” payout. In the months leading up to their latest filing, Fuyou Payment paid out substantial dividends totaling about 285 million yuan from 2021 to 2023, which equates to about 92% of the company’s net profits during that period. This strategic move to distribute such a high percentage of profits to shareholders could be seen as an effort to placate investors while also providing an exit option for existing stakeholders in the immediate lead-up to the IPO.
Fuyou Payment is attempting to carve out its niche in an industry long commanded by giants like Alipay and WeChat Pay. Recent statistics indicate that in 2023, Alipay maintained a market share of 34.5% in the payment sector with WeChat Pay closely following at 29%. Moreover, in mobile payment transactions, Alipay accounted for 54.5% while WeChat contributed 38.8%. The implication for any smaller player, such as Fuyou Payment, is stark: without innovative strategies to draw in users and build ecosystem partnerships, gaining market traction will be difficult.
In the context of the competitive landscape, Fuyou Payment's financial data over the past few years illustrates the uphill battle it faces. Advertised revenues show a slight uptick from 1.102 billion yuan in 2021 to 1.506 billion yuan in 2023, but the net profit figures tell a more troubling story, with net income fluctuating and indicating a challenging path ahead. Compared to the listed competitor Lianlian Group, which reported losses of 654 million yuan in a recent fiscal year, or Lakala with revenues nearing 5.934 billion yuan and experiencing profit margins due to strategic placements in financial technology, Fuyou Payment finds itself in an industry with a clear disparity between the leaders and smaller entities.
Looking ahead, Fuyou Payment aims to utilize the funds raised from the IPO to bolster its technological capacities, expand its service offerings, and establish a stronger foothold both domestically and internationally. According to their prospectus, a planned allocation of the IPO proceeds includes 35% for developing innovative payment solutions, 30% designated for technology and infrastructure investments, and 15% set aside for expanding their payment network and solidifying partnerships with ecosystem players.
This comprehensive strategy aims to not only recover the company's financial foothold but also to project Fuyou Payment into the forefront of a burgeoning market. Reports indicate that the total payment amount in China's comprehensive payment market is on a compound growth trajectory, forecasted to reach staggering figures in the coming years. With further innovation, strategic directives, and a successful IPO, Fuyou Payment hopes to elevate its position in an industry ripe for continued growth.
In this high-stakes environment characterized by rapid evolution and fierce competition, Fuyou Payment's voyage to public listing underscores the broader trends influencing China’s payment sector and the continuous efforts of smaller players trying to break through the seemingly impenetrable barriers established by dominant giants.