UP Fintech Holding Limited (NASDAQ: TIGR) provides online brokerage services focusing on Chinese investors. The company has developed a brokerage platform that can be accessed through its APP and website. It offers brokerage and value-added services, including trade order placement and execution, margin financing, account management, investor education, community discussion, and customer support. The company was founded in 2014 and is based in Beijing, China. UP Fintech is an “emerging growth company” under applicable U.S. federal securities laws and is eligible for reduced public company reporting requirements.
The unique and differentiating factor of the company: The following competitive strengths contribute to the rapid success and differentiate UP Fintech from its competitors:
- The platform of choice for trading U.S. securities online among global Chinese investors with the fastest growth;
- High caliber customer base with excellent growth potential, engagement, and stickiness;
- Constant expansion and innovation of products and services to serve customers’ evolving needs;
- Unparalleled user experience and interactive investment community;
- Robust infrastructure and advanced technology supporting all aspects of our business; and
- A talented team backed by strong shareholder support.
- The company recently priced its IPO at $8/ADS. The ADSs commenced trading from March 20, 2019, on the Nasdaq Global Select Market under the symbol “TIGR.” The total gross proceeds of the offering are expected to be approximately US$104.00 million.
- According to the iResearch Report, China has become the second largest wealth management market in the world through a rapid accumulation of private wealth during the past decade. The size of China’s total individual investable financial assets has grown at a compound annual growth rate, or CAGR, of 16.5% from RMB77.0 trillion as of 2013 to RMB142.0 trillion as of 2017 and is projected to further grow to RMB245.0 trillion in 2022.
- As of January 31, 2019, the company had 83,546 customers with deposits, and the account balance of such customers reached US$2,632.6 million, representing an increase of 11.7% from December 31, 2018.
- So far business is concerned, the company has continued to achieve substantial growth ever since the launch of its trading platform in August 2015. Furthermore, apart from the considerable growth TIGR have experienced, the turnover rate of its platform during the fourth quarter of 2018 was as high as 1,495.7%. Moreover, the conversion rate and retention rate of customers were as high as 15.2% and 81.8% as of December 31, 2018, and in 2018, respectively.
- UP Fintech generate revenues primarily by charging its customer’s commission fees for the trading of securities as well as earning interest income or financing service fees arising from or related to margin financing provided by themselves or third parties to its customers for trading activities. The company’s total revenues were US$5.5 million, US$16.9 million and US$33.6 million in 2016, 2017 and 2018, respectively. UP Fintech recorded net losses of US$10.8 million, US$7.9 million and US$44.3 million in 2016, 2017 and 2018, respectively.
Analyst tracking the stock believes that TIGR is one of the largest online brokers focusing on global Chinese investors in terms of U.S. securities trading volume, with a significant market share of approximately 58.4% in 2017, according to the iResearch Report. The company’ proprietary trading platform enables investors to trade in equities and other financial instruments on multiple exchanges around the world.
Moreover, UP Fintech’s, continuous focus on offering innovative products and services and superior user experience has enabled it to become one of the most utilized and well-recognized online trading platforms for Chinese investors around the world.
The company has already achieved RMB1.0 trillion cumulative trading volumes on its platform within three years since the launch of the Tiger Trade APP, which represents the shortest timeframe among all online brokers focusing on global Chinese investors. With these positive developments, the company is well poised to gain in an already booming market.
About the Industry:
- Online brokers utilize APPs and websites to provide integrated online securities services, including customer acquisition, account opening, securities trading, and other value-added services. Online brokers focusing on global Chinese investors refer to online brokers who are able to provide all the services in the Chinese language and offer a user-friendly experience that specifically fits Chinese investors’ preferences. For this prospectus, “Chinese investors” refer to the Chinese speaking population around the globe. According to the iResearch Report, with the increasing need to trade efficiently, the customer base trading through online brokers will grow at a faster pace than that through traditional brokers.
- According to the iResearch Report, the market size of online brokerage in terms of U.S. stock trading volume reached US$5,427.2 billion in 2017, accounting for approximately 14.7% of total trading volume in the U.S. stock market, and is expected to reach approximately US$6,852.4 billion in 2018, accounting for approximately 15.0% of total trading volume in the U.S. stock market. The market size of online brokerage in terms of Hong Kong stock trading volume reached US$93.9 billion in 2017, accounting for approximately 3.4% of total trading volume in the Hong Kong stock market, and is expected to reach approximately US$149.6 billion in 2018, accounting for about 4.1% of total trading volume in the Hong Kong stock market.
- The online brokerage industry focusing on global Chinese investors is highly concentrated yet competitive. Service providers that have superior user experience, better technology, as well as stronger brand recognition and reputation in the industry can acquire customers more effectively. According to the iResearch Report, the market size of the online brokerage industry focusing on global Chinese investors in terms of both the U.S. and Hong Kong stock trading volume experienced rapid growth over the past three years.
- According to the iResearch Report, UP Fintech is the largest online broker focusing on global Chinese investors in terms of U.S. securities trading volume in 2017, with a market share of approximately 58.4%. The company believes that its superior user experience, proprietary technology platform and strong brand recognition in the industry enable it to maintain the leadership in terms of U.S. securities trading services and further strengthen its competitiveness in terms of Hong Kong securities trading services for global Chinese investors.
Key strategies of the company:
- Expand demographic coverage to serve global investors;
- Attract more institutional investors;
- Expand into the asset and wealth management business;
- Strengthen the technology capabilities through continuous investment;
- Further, strengthen brand equity; and
- Attract and retain talent.
Latest Quarter Financial position:
- Total revenues increased by 98.0% from US$16.9 million in 2017 to US$33.6 million in 2018. This increase was driven by significant improvements in both commissions and financing service fees, as well as the increase in other revenues.
- Total operating cost and expenses increased by 209.9% from US$26.0 million in 2017 to US$80.5 million in 2018 with increases in all components of operating cost and expenses.
- UP Fintech had a loss before income taxes of US$46.2 million in 2018, compared with a loss before income taxes of US$9.1 million in 2017. The company had a negative operating margin of 53.2% in 2017, and negative operating margin decreased to 139.7% in 2018. The deterioration in operating margin was primarily attributable to the increase in share-based compensation in relation to the grant of the equity incentive awards to its management and employees.
- As a result of the foregoing factors, net loss increased by 458.8% from US$7.9 million in 2017 to US$44.3 million in 2018.
- As of December 31, 2018, a majority of the company’s cash and cash equivalents were denominated in U.S. dollars and Renminbi. The company had US$34.4 million in cash and cash equivalents as of December 31, 2018. The cash and cash equivalents consist of cash on hand, bank deposits and cash equivalents that (i) are highly liquid, (ii) have original maturities of three months or less and (iii) are unrestricted as to withdrawal or use.
Key risk factors and potential stock drivers:
- Continued growth in the availability of mobile or Internet access and more developed IT infrastructure.
- The company has incurred net losses and had net operating cash outflows and may continue to incur losses and have cash outflows in the future. Therefore, its ability to manage its liquidity and overall financial flexibility would continue to remain a key stock sensitivity factor over the near to medium term.
- The businesses of securities and other financial instruments are heavily regulated. Therefore, any Non-compliance with applicable laws in certain jurisdictions could potentially harm the business, reputation, financial condition and results of operations. Moreover, any future change in the regulatory and legal regime for the securities brokerage industry may have an impact on the business model.
- The company faces intense competition, and if it does not compete effectively, the results of operations and business prospects could be impacted.
- On Friday, April 26th, 2018, TIGR closed at $16.76 (Up by 14.56%) on an average volume of 4.1 million shares exchanging hands. Market capitalization is $2.226 billion. The current RSI is 61.42
- In the past 52 weeks, shares of TIGR have traded as low as $8.07 and as high as $40.00
- The present support and resistance levels for the stock are at $13.14 & $18.01 respectively.
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