What happened
Shares of Futu Holdings (NASDAQ: FUTU) were trading nearly 9% lower as of 12:30 p.m. ET after the Hong Kong-based online brokerage and wealth management platform operator reported its fourth-quarter results.
So what
Futu reported earnings equivalent to $0.42 per American Depository Share, a decrease of nearly 16% from Q4 2020. Total revenue came in at $205.5 million, up about 35% year over year. Although only one analyst is listed as having offered a forecast for Futu's Q4 results on Yahoo! Finance, its earnings and revenue missed those estimates by wide margins.
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The total number of paying clients on the platform grew 141% year over year to 1.24 million. Management thinks it can add 200,000 net new paying clients in 2022. Total users reached 17.4 million, up nearly 46%. Total client assets grew to $54.7 billion, up 75%.
Additionally, Futu announced the authorization of a new share repurchase program for up to $500 million of American Depository Shares through the end of 2023, which will be funded from existing cash.
Now what
Although it missed estimates, Futu showed some solid growth in 2021, and the share buyback program likely pleased investors. In fact, Futu stock was up nicely in pre-market trading Friday.
However, green quickly turned red -- likely due to news that the Securities and Exchange Commission may delist five Chinese companies from U.S. exchanges for failing to hire acceptable auditors, which meant that their financials could not be reviewed by U.S. regulators. The Holding Foreign Companies Accountable Act, enacted in 2020, bans companies from trading on U.S. exchanges if their audits can't be reviewed for three years in a row.
Futu wasn't one of the companies named by the SEC this week. However, from the information I could gather, the stock is only listed on the NASDAQ, and investors are nervous about what other Chinese companies might be delisted. Many Chinese stocks were trading lower Friday morning.
Futu had a solid quarter, but whenever you are investing in companies based in China, you need to be acutely aware of how regulations and geopolitical concerns can impact their businesses, which is why I typically advise caution regarding these stocks.
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