UP Fintech swings to $26.9M loss on $59.7M China fine

UP Fintech Holding Ltd., the Nasdaq-listed operator of Tiger Brokers, swung to a $26.9 million net loss in the first quarter after Chinese regulators imposed $59.7 million in penalties on its subsidiaries for unlicensed cross-border securities operations.

"The Company sincerely accepts the penalty and has recognized it as a subsequent significant event for the first quarter," Wu Tianhua, chairman and chief executive officer of UP Fintech, said. "Considering the Company's overall profitability and cash flow position, this one-off expense will not have a material adverse impact on our business operations or long-term development."

Revenue rose 26.3 percent to $154.9 million from $122.6 million a year earlier, driven by a 15.3 percent increase in commissions to $67.2 million and a 19.8 percent gain in interest income to $64.5 million. Other revenue, which includes investment banking and wealth management services, surged 161.4 percent to $20.7 million. Operating expenses climbed 32.9 percent to $89.2 million, with employee compensation up 38.5 percent as the company added headcount to support global expansion.

The Beijing bureau of the China Securities Regulatory Commission on May 22 ordered the confiscation of illegal income and levied administrative fines totaling about 411 million yuan, or roughly $59.7 million. The penalty, booked in the "others, net" line item, swung that category to a $64.1 million expense and pushed pretax results into a $16.5 million loss. Without the fine, the broker would have remained profitable. On a non-GAAP basis, which excludes share-based compensation, the net loss was $23.8 million, compared with non-GAAP net income of $36 million a year earlier.

The company added 28,900 funded accounts during the quarter, bringing the total to 1.28 million, up 11.3 percent year over year. Net asset inflows reached $2.9 billion, marking the first time quarterly inflows from consolidated retail accounts exceeded $2 billion. Total client assets stood at $58.9 billion at quarter end, up 28.4 percent from a year earlier but down 3.2 percent from the prior quarter, reflecting $4.9 billion in mark-to-market losses from a pullback across financial, technology and consumer discretionary stocks. Wu said Nasdaq's second-quarter rebound has since recovered those paper losses.

The company's corporate business underwrote 10 Hong Kong IPOs in the quarter, including AI developers MiniMax and Zhipu AI, and participated in two US SPAC deals. Hong Kong IPO subscriptions on the Tiger platform have exceeded HK$1 trillion year to date. The employee stock plan business added 42 clients, bringing the total to 790.

On the product side, UP Fintech upgraded its Tiger AI assistant to a multi-agent architecture and integrated Anthropic's Claude model alongside its existing two models. The platform also launched Hong Kong index options trading and a time-weighted average price order function for options.

Cash and term deposits ended the quarter at $598.1 million, down from $793.1 million three months earlier. The board approved a share repurchase program of up to $50 million over 12 months starting June 1, funded from existing cash.

The penalty signals that Chinese regulators are tightening enforcement on platforms that route mainland clients into overseas markets, a gray area both Tiger Brokers and rival Futu Holdings have operated in for years. Investors will watch the company's Q2 earnings call for updates on regulatory developments and whether the $50 million buyback program supports the stock.

This article is for informational purposes only and does not constitute investment advice.