Legend-Backed Lakala Files for IPO in Shenzhen

(Beijing) — Lakala Payment Co. Ltd., one of the country’s earliest online payment providers, could become the first among its peers to list in China, after it filed a prospectus for an initial public offering (IPO) on the Shenzhen stock market.

Lakala, backed by financial conglomerate Legend Holdings Corp., plans to issue up to 40.01 million shares on Shenzhen’s small-cap ChiNext board, according to the prospectus posted on the website of the China Securities Regulatory Commission (CSRC) website on March 3. No pricing details were disclosed, but the prospectus said that all funds raised will be used to invest in a 2 billion yuan ($290 million) project to integrate Lakala’s online and offline services, increase its customer base and support the company’s expansion in the payments industry.

Founded in 2005, the company’s core business involves selling point-of-sale machines to business users and providing online payment services to individual customers. It was among the first group of companies to be granted a license to engage in third-party payment services in 2011.

The prospectus shows that the Beijing-based company was profitable in 2015 and made a net profit of 211.7 million yuan from January to September last year.

China’s third-party payment sector is currently dominated by Alipay, owned by Jack Ma’s Ant Financial, and Tenpay, the online payment arm of gaming and social network giant Tencent. The two together controlled nearly 90% of the online payment market in 2015, according to Lakala’s prospectus, which cited data from market research firm iResearch. Lakala, although ranked the third-largest online payment provider, had only 2.4% of the market.

ChinaPnR, a financial services provider whose business includes a peer-to-peer lending platform and third-party payment, filed an IPO application last year although it has yet to receive regulatory approval. While there has been speculation that Ant Financial will soon file for an IPO, Jack Ma has yet to confirm any plan. Last year, he said the company will list “someday.”

“It’s reasonable for Lakala to raise money if it wants to continue growing”, said Aaron Guo, a senior analyst at Mintel. But considering its size, there’s not much chance Lakala will be able to challenge the current market dynamic, he added.

Lakala attempted to go public last year through a backdoor listing which involved its acquisition by Shanghai-listed Tibet Tourism for 11 billion yuan in cash and shares. But the plan was cancelled in June after the securities regulator tightened scrutiny of backdoor listings.

Legend Holdings, best known for its links to technology group Lenovo, is currently Lakala’s biggest shareholder with a 31.4% stake, followed by Lakala’s founder and chairman Sun Taoran with a 7.7% stake. The third largest shareholder is Dazi Heming Yongchuang Investment Management Center, which holds 5.6%. Other shareholders include Taiping Life Insurance Co., Ltd., and the Civil Aviation Investment Fund.

Contact reporter Chen Na (nachen@caixin.com)