Three years after listing on the NASDAQ stock exchange in a $46 million IPO, Qingke Apartment Leasing was declared bankrupt by a mainland court. The name of the Morgan Stanley-backed apartment rental platform can be translated as “eggshell” and in this case, the shell has indeed broken.
Documents published on China’s National Bankruptcy and Enterprise Reorganization Information Network show that on January 18, Shanghai Intermediate People’s Court No. 3 accepted a bankruptcy and liquidation case for Shanghai Qingke Public Rental Housing Leasing. Management Co, the main mainland entity of Qingke, which is listed on NASDAQ as Q&K International Group. Creditors have until March 20 to declare their claims.
The company’s business model has been to manage China’s ocean of empty apartments on behalf of individual landlords and provide housing for China’s rising professional class, however, Qingke’s operations have been plagued by complaints from landlords and tenants, and marked by repeated sanctions from local authorities.
Having lost 2.8 billion RMB ($443 million) over the past four years, the company’s share price has fallen 97% since its IPO, and like its competitor, Danke, which was delisted from the NYSE last year, Qingke has become a byword for housing nightmares among Chinese renters.
Apartment hopes meet reality
Listed on NASDAQ in November as the first Chinese long-term rental apartment brand on a US stock exchange, Qinke shares rose 4% on their first day of trading, with the company valued at more than 800 million. of dollars.
In 2018, Morgan Stanley Private Equity Asia and Singapore-based venture capital firm Crescent Point led a $100 Series C funding round for Qingke, with a representative from the US investment bank stating, ” We are bullish on this trillion yuan market segment. and have confidence in Qingke’s management team and the company’s highly automated operational platform.
Qingke, one of several corporate-funded apartment rental platforms that have sprung up in China over the past decade as the country took its first steps towards weaning its citizens off home ownership to ownership, never achieved profitability, and according to its IPO prospectus and subsequent financial reports, has lost over the past four years nearly RMB 2.8 billion, including a loss of more than 1.5 billion RMB in 2020.
Tenants of Qingke-managed properties have often been evicted by landlords after the company failed to pay apartment owners after collecting rent from occupants and more than 1,000 administrative rulings were issued against the company , according to local reports.
Reports also reported that electricity and water services in Qingke apartments were cut off by unpaid landlords while tenants had made all payments to the rental platform. Previous judgments against the company have piled up with almost RMB 30 million of obligations still outstanding.
While competitor Danke has gained greater notoriety in China after being investigated by the Shenzhen government in 2020 before being delisted from the New York Stock Exchange last year, Qingke has faced to continuous salvoes of lawsuits for unpaid bills, which have only intensified since the start of the pandemic.
In January 2021, Qingke founder Jin Guangjie resigned as CEO, chairman of the board, chairman of Qingke Apartments and other positions, and has since completely resigned from company management.
In August 2021, a court ruling in a case brought by a creditor, Shanghai Vipshop Small Loan Co., Ltd, ruled that Qingke had to pay RMB 86,200 in rent and legal fees, but found that the company had no no property to perform. Other cases have resulted in the seizure of properties held by Qingke by the courts.
In October of the same year, Qingke Apartment announced that it had received a notice from NASDAQ that the closing price of Qingke’s American Depository Stock (ADS) had fallen below $1 per share for 30 consecutive business days. and that, therefore, the company had not met the minimum requirements to be listed on the stock exchange.
As of the close of trading on January 24, Qingke Apartment was listed at US$0.44 per share, down more than 97% from the issue price.