Send me real-time posts from this site at my email
Motley Fool

Why Shares of Qudian Slumped Today

What happened

Shares of Qudian (NYSE: QD) tumbled on Thursday after the Chinese online consumer finance company withdrew its annual guidance. A massive share buyback program wasn't enough to quell the market's concerns. As of 11:45 a.m. EST, the stock was down about 15.6%.

So what

Qudian has pulled its fiscal 2019 guidance and will not issue any guidance in the near term. The company blamed uncertainty related to the regulatory and operating environment.

Image source: Getty Images.

Qudian pointed to multiple recent developments in the online consumer finance industry in China, including restrictions on loan collection practices, data privacy rules, and a requirement for peer-to-peer (P2P) lending platforms to exit the peer-to-peer business. China announced the P2P lending crackdown in November.

Qudian said that these changes have reduced the availability of funding for consumer credit while increasing delinquency rates. The company's transaction volumes have decreased substantially due to significantly stricter standards for loan approvals.

"As a precautionary measure in the current environment, the Company has deployed a conservative and prudent strategy to reduce loan volumes and has suspended its credit trial program," Qudian said in the press release announcing the news.

Now what

Along with the guidance withdrawal, Qudian announced a new $500 million share repurchase program. With a market capitalization below $1 billion after Thursday's plunge, the buyback will substantially reduce the number of shares.

Qudian's guidance pull is a good demonstration of the risks inherent in investing in Chinese companies, especially those heavily exposed to regulation. The stock is now down nearly 90% from its all-time high.

10 stocks we like better than Qudian Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Qudian Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of December 1, 2019

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


Source

Popular posts

Welcome!!! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue