Chinese Fintech Mogul’s Wealth Soars 460% As Investors Flock To His Site

Chinese retail investors thronging to join Futu Holdings’ online brokerage during the pandemic have sent the company’s stock soaring this year, and boosted the wealth of its founder Leaf Li by nearly 460%.

The Shenzhen-based company, which operates the Futubull and the Moomoo trading apps, saw its Nasdaq-listed shares soar from $8.34 in March to reach $46.51 in New York overnight. The firm’s 44-year-old founder, who owns 40% of the company, now has a fortune of $2.3 billion, according to Forbes estimates. Although quarantine rules have largely been eased in China, Futu is still attracting investors and Li says he’s laying the groundwork for a similar expansion outside of China.

Futu said on Thursday that the platform’s registered users increased to almost 1.2 million in the third quarter, an 80% jump from a year earlier. In the second quarter, Futu had gained 55% more users on the same basis.

“The pandemic has given rise to the use of online services, and it helps to differentiate us further from the brick-and-mortar brokerages,” Li said in a phone interview.

The brokerage also reported that revenue shot up 272% in the same quarter to HK$946.2 million ($122.1 million). Futu said its net profit of HK$401.7 million was 18 times higher than the same period last year.

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Rather than dealing in shares traded in mainland stock markets, known as A shares, Futu has differentiated itself from its peers by offering investors access to stocks traded in Hong Kong. Wang Leilei, an analyst at Shanghai-based research firm KapronAsia, said that’s how Futu stands apart from other brokerages.

“Providing broker services for A shares is really competitive and the licenses aren’t that easy to get,” she says. “Futu started with Hong Kong since the founding of its business.”

While local competition is plenty, Li sees his advantage as having licenses that allow investors to go beyond the domestic market and trade stocks elsewhere. He acquired the licenses to operate in Singapore in August, and plans to offer stock trading services there by the middle of next year. The company has licenses for the U.S. as well, and is currently testing its products before a wider launch. The billionaire hopes to eventually get one-third of total revenues from overseas users.

And although the shock suspension of Ant Group’s $35 billion IPO has dampened some investors’ enthusiasm for Hong Kong, the city is still on track to attract more technology share sales from mainland China, especially as listing rules could be relaxed further, Li says. Plus, a Biden-Harris win, coupled with rising hopes for a Covid-19 vaccine, has led the U.S. market to surge recently.

“The U.S. market dropped a lot earlier this year, but now it has big opportunities,” he says. “And for the next three to five years, more and more of China’s new economy companies will choose Hong Kong as the primary listing destination.”

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The entrepreneur knows how to ride on market opportunities. After graduating with a bachelor’s degree in computer science from Hunan University in 2000, he joined Tencent just 2 years after its founding as employee No. 18. At that time, Tencent was still a small operation, and Li worked alongside cofounder Pony Ma on its QQ messaging service, which became one of Tencent’s most successful products that now has over 600 million monthly active users.

Li’s rise through the corporate ranks saw him put in charge of the company’s fledgling streaming platform Tencent Video, which now boasts of having 114 million paying subscribers. Li’s first brush with stocks came in 2004, when Tencent debuted on the Hong Kong stock exchange. He then started investing in Hong Kong-listed companies, but said he grew increasingly frustrated with what he saw as a lack of reliable and easy-to-use trading software.

The idea of developing an online brokerage gradually took hold. Li left Tencent in 2008, spent the next two years preparing for his own business venture, and launched Futu in 2011. Tencent was an early investor in the company, and currently holds a 30% stake, making it Futu’s second-largest shareholder.

But the entrepreneur has challenges to overcome. China’s traditional brokerages such as Huatai and Haitong are moving online, and starting to offer trading services for Hong Kong. As for international expansion, Li is facing an increasingly volatile environment where rising national security concerns have derailed the global plans of Chinese tech companies from smartphone maker Huawei to TikTok owner Bytedance.

“You have to be mindful that the U.S. might not welcome Chinese companies at this stage,” says Qian Hang, a partner at consulting firm Oliver Wyman, adding that Southeast Asia has better chances as the region is relatively more open to Chinese firms.

Li said he complies with local laws regarding the handling and storage of user data, and will hone his products first. “We follow all the local regulations and store data locally,” he says. “We are focusing on Singapore and U.S. for our international plans, and we’d do it step by step.”

Source: Forbes – Business