SoftBank-Backed OneConnect Takes A 50 Pct Valuation Hit

China’s cloud-based FinTech platform OneConnect reduced its U.S. initial public offering (IPO) on Thursday (Dec. 12) by nearly 50 percent, the Financial Times (FT) reported.

The move is a blow to Japan’s SoftBank, which backed OneConnect through its Vision Fund. OneConnect is just one of several Shenzhen-based Ping An Insurance businesses backed by SoftBank. OneConnect provides technology solutions that help increase revenue and manage risks for small and mid-size financial institutions (FIs) in China.

OneConnect said it was cutting the share sale’s size as well as the targeted price range. A stock exchange filing on Thursday (Dec. 12) indicated that the company was looking to raise $299 million at a valuation of $3.6 billion. The original target was $504 million.

The company is expecting to sell 26 million shares for $9 to $10 each, instead of the originally planned 36 million for $12 to $14, according to the filing.

OneConnect raised $650 million at a $7.5 billion valuation last year, according to filings by PingAn. Its public listing was initially expected to happen in Hong Kong.

“The willingness of shareholders . . . to suffer the humiliation of a massive down round is a red flag,” Arun George, an analyst at Global Equity Research, said in a report on the research platform Smartkarma. “The quick succession of the valuation cuts suggests that OneConnect has likely deep underlying issues.”

The company saw a net loss of $147 million on $218 million in revenue during the nine months that ended Sept. 30. This was in comparison to an $82 million net loss on revenue of $128 million for the same period in 2018, according to reports.

The company has a $650 million Series A financing round under its belt, which valued the company at $7.4 billion.

In October, SoftBank said it was seeking money for another big tech investment despite the falling valuations of its other big holdings and following WeWork’s botched IPO.

SoftBank’s Founder and CEO Masayoshi Son is pushing forward with Vision Fund 2, which was announced in July at $108 billion, but the reception by investors has been weak. The fund’s sole major commitment on the table is SoftBank’s $38 billion pledge.