NASDAQ-Listed Apartment Platform Qingke Enters Bankruptcy in Shanghai

Three years after listing on the NASDAQ exchange in a $46 million IPO, Qingke Apartment Leasing has been declared bankrupt by a mainland court. The Morgan Stanley-backed apartment rental platform’s name can be translated as ‘eggshell’ and in this instance the shell has well and truly broken.

Documents published on China’s National Enterprise Bankruptcy and Reorganization Information Network show that on 18 January, the No. 3 Intermediate People’s Court of Shanghai accepted a bankruptcy and liquidation case for Shanghai Qingke Public Rental Housing Leasing Management Co, the primary mainland entity of Qingke, which is listed on the NASDAQ as Q&K International Group. Creditors have until 20 March to declare their claims.

The firm’s business model has been to manage China’s ocean of empty apartments on behalf of individual landlords and provide housing China’s rising professional class, however, Qingke’s operations have been plagued by complaints both from homeowners and renters, and scarred by repeated penalties from local authorities.

Having lost RMB 2.8 billion ($443 million) over the past four years, the firm’s share price has fallen 97 percent since its IPO, and like its competitor, Danke, which was de-listed from the NYSE last year, Qingke has become a byword for housing nightmares among China’s renters.

Apartment Hopes Meet Reality

Listed on the NASDAQ in November as China’s first long-term rental apartment brand on a US exchange, Qinke shares up moved up 4 percent in their first day of trading, with the company valued at more than $800 million.

In 2018, Morgan Stanley Private Equity Asia and Singapore-based venture capital firm Crescent Point had led a $100 series C financing round for Qingke, with a representative of the US investment bank declaring that,  “We are optimistic about this trillion-yuan market segment and are confident in Qingke’s leadership team and the company’s highly automated operational platform.”

One of a number of venture-backed apartment rental platforms which sprung up in China during the previous decade as the country took its first steps towards weaning its citizens off of home ownership, Qingke has never achieved profitability, and according to its IPO prospectus and subsequent financial reports, has over the last four years lost nearly RMB 2.8 billion, including a loss of over RMB 1.5 billion in 2020.

Tenants in properties managed by Qingke have frequently faced eviction by landlords after the company failed to pay apartment owners after collecting rent from occupants and more than 1,000 administrative rulings have been made against the company, according to local news reports.

News reports also carried reports of electricity and water service at Qingke apartments being cut off by unpaid homeowners despite tenants have made all payments to the rental platform. Previous judgements against the company have stacked up with nearly RMB 30 million in obligations still unpaid.

Disruptive Change

While competitor Danke gained greater notoriety in China after being investigated by the Shenzhen government in 2020 before being de-listed from the New York stock exchange last year, Qingke has faced ongoing salvos of lawsuits over unpaid bill, which have only intensified since the start of the pandemic.

By January 2021, Qingke founder Jin Guangjie resigned from his roles as CEO, chairman of the board of directors, chairman of Qingke Apartments and other positions, and has since completely resigned from the company’s management.

In August 2021, a court ruling in a case brought by a creditor, Shanghai Vipshop Small Loan Co., Ltd, ruled that Qingke should pay RMB 86,200 in rent and legal fees, but found the company had no property to execute. Other cases resulted in properties held by Qingke being seized by courts.

In October of the same year, Qingke Apartment announced that it received a notice from the NASDAQ that the closing price of Qingke’s American Depositary Shares (ADS) had fallen below $1 per share for 30 consecutive business days, and therefore the company had not met the minimum requirements for listing on the exchange.

As of the close of trading on 24 January Qingke Apartment was quoted at US$0.44 per share, a drop of over 97 percent from the issue price.