Lufax buyback boosts case for direct listings

 Lufax buyback boosts case for direct listings

A Chinese flag is pictured at Lujiazui financial district in Pudong, Shanghai, China May 22, 2020. REUTERS/Aly Song

Returning unneeded funds to shareholders is generally a good idea. Doing so shortly after raising capital in an initial public offering, however, suggests something is amiss. The decision by $31 billion Chinese financial technology company Lufax (LU.N) to buy back some the same stock it sold to new investors seven months ago speaks to equity issuance problems and lifts the case for direct listings.

Ping An Insurance-backed (601318.SS), (2318.HK) Lufax, which specialises in facilitating small business loans, said on Monday it would repurchase as much as $300 million of shares. They have been trading at a limp 14 times expected earnings for the coming year since last October’s New York IPO, despite solid financial performance and perkier management forecasts.

Lufax is only the latest to swiftly reverse capital-market…

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