Wealth Management Marketplace Puyi Files For U.S. IPO

Summary

• Puyi aims to raise $40 million in a U.S. IPO of its ADSs.
• The firm operates an online wealth management marketplace connecting service providers with investors.
• PUYI is growing only moderately but is profitable and generated free cash flow in its most recent fiscal year.
• This idea was discussed in more depth with members of my private investing community, IPO Edge. Get started today »

Quick Take

Puyi (PUYI) intends to raise gross proceeds of $40 million from a U.S. ‘best efforts’ IPO, according to an F-1 registration statement.

The firm operates as a third-party online wealth management marketplace.

PUYI is growing revenue only moderately but is profitable and free cash flow positive. I’ll provide an update when we learn more details about the IPO from management.

Company & Technology

Guangzhou, China-based Puyi was founded in 2010 to provide wealth management services by connecting third-party wealth managers with consumers online via its marketplace and offline through its branch network.

Management is headed by Founder, Chairman, and CEO Yu Haifeng, who was previously General Manager for Fanhua Dongguan Jiayu Insurance Agency.

Puyi has developed a portfolio of wealth management services that include publicly raised fund products, exchange administered products and asset management plans online, and privately raised fund products offline.

Also, the company’s portfolio of corporate finance services includes financial solutions for product design, identification of sources of funding, compliance and risk management.

Customer Acquisition

Puyi’s client acquisition approach is composed of identifying, fostering and collaborating with ‘seed clients’ to actively market its products or services on social media platforms to their families, friends, and acquaintances. Seed clients [SCs] are existing clients who believe strongly in the company’s service capabilities.

The firm’s SCs are supported by about 100 of its investment advisors. Their responsibilities include providing SC with systematic and continuous professional training on the Puyi’s portfolio, and investment and asset allocation.

Selling expenses as a percentage of revenue have increased sequentially in the past year, indicating decreased selling efficiency as the firm scales its operations, per the table below:

Selling Expenses	Expenses vs. Revenue
Period	Percentage
FYE Q2 2018	27.4%
FYE Q2 2017	22.5%

Click to enlarge

Sources: Company registration statement, IPO Edge

Market & Competition

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.