On October 18th of this year, the stock market cheered as Chinese micro-lender Qudian (QD) launched its $900 million-dollar initial public offering. Qudian services the insatiable demand that exists in China for short-term on-line unsecured “micro-loans.”
Its IPO was heralded as one of the most significant U.S. listings this year coming from China.

According to its filing: Qudian “target[s] hundreds of millions of quality, unserved or underserved consumers in China.” Lending money to, “young, mobile-active consumers who need access to small credit for their discretionary spending but are underserved by traditional financial institutions.” In other words, they lend small amounts of money at high rates to dodgy borrowers who want to buy things on Alibaba.

But despite its questionable business model, the company had an impressive public debut and was the biggest percentage gainer that day on the New York Stock Exchange (NYSE); when its American Depositary Receipts (ADRs) priced at $24 per share, the soared 40% to $34.35.

But, as the saying goes “what goes up, must come down”; and for Qudian, this adage proved true at an alarmingly fast rate. In a matter of weeks, the ADRs of Qudian, as well as other Chinese quick loan lenders, plummeted from concerns by Chinese regulators over the high-interest rates charged on micro-loans that can exceed 35%.

The Chinese government addressed these concerns by suspending the regulatory approval for new online micro-loan companies; sending Qudian down 20% on November 21st, from its high price of $35; before crumbling to around $11, where it sits today.

Indeed, cracks are appearing in Chinese markets with the Shanghai/Shenzhen suffering a 300-point drop of almost 5% over the Thanksgiving Holiday. Stifling new guidelines have also created a rout in the bond market where yields on government treasury bonds rose to three-year highs; the yield on the Chinese-10 year has risen from about 3.6% in early October, to over 4% recently, which is a three-year high.