What happened
FinVolution Group (NYSE: FINV) stock was dropping on Wednesday, down 14.7% at the closing bell. It had been down as much as 20.5% in the morning. The penny stock was trading at $3.83, down about 24% year to date.
The major indexes were mostly down on Wednesday as the S&P 500 was off 27 points, or negative 0.7%, and the Dow Jones Industrial Average was down 281 points, or negative 0.9%. However, the Nasdaq Composite finished the day up 6 points, or 0.1%.
So what
FinVolution Group, a Chinese fintech, had a few different catalysts for its share-price volatility today. The consumer finance firm, which connects borrowers who are underserved with lenders via its online platform, posted its fourth-quarter earnings on Tuesday after market close, and the results were mixed.
Revenue was up 25% in the quarter year over year to 3.1 billion renminbi (RMB), or $442 million USD, on a 25% increase in transaction volume on its platform. The bulk of the transaction volume is in China, but the firm saw a 41% increase in international transactions.
However, net profit was down 14% year over year to RMB556 million, or $81 million USD, on higher credit losses for quality assurance commitment, due to an increase in loan volume and outstanding loan balances. The 90-day delinquency ratio ticked up to 1.41%, from 1.26% a year ago.
But the larger catalyst for the drop may have been the announcement that CEO Feng Zhang resigned due to personal reasons. Tiezheng Li, who had been vice chairman of the board and president of the company, was named the new CEO. Li is a co-founder of the company and has served in various roles over the years, including president since 2020.
"Feng has served the company with pride and dedication for eight years. He has worked tirelessly over his tenure, leading the company to complete multiple transitions and drive value and growth for all stakeholders of FinVolution Group. On behalf of the board, we thank him for his invaluable contributions and many years of service and wish him all the best in his future endeavors," Li said.
Now what
While it's not clear why Zhang left, these type of management transitions typically rattle investors initially. But his replacement is a co-founder of the company and has been president, as well chief strategy officer, chief operating officer, and chief risk officer over the years, so the transition should be pretty seamless.
The company also provided guidance for 2023, calling for a 10% to 20% increase in transaction volume. But while the Chinese government modified its zero-COVID policy, the impact of the virus still remains a wildcard. FinVolution has been a steady revenue grower, but uncertain economic conditions cloud its outlook.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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