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China's tech-startups throng for IPO

Jul 9, 2018 by A. Alfaro
China's tech-startups throng for IPO

Many Chinese tech companies such as Xiaomi, Liepin, Meituan or Inke will be listed in Hong Kong, Mainland China, New York and Nasdaq. We take a sneak peek into the current state of these companies.

Liepin

Liepin is a community-based recruitment site founded in 2011. The company submitted its prospectus in April and is the first company of its kind to be listed in Hong Kong. According to the prospectus, Liepin saw an income of USD 124 million in 2017, with USD 1 million in profits. The company became profitable after reporting losses of USD 35 and 21 million in 2015 and 2016 respectively. Liepin was officially listed on June 29th with a stock price of HKD 31 per share, with a total valuation of almost USD 18 million.

There are currently more than 170,000 job-searching platforms in China. The ten largest companies only control 2.9 per cent of the market. In order to grow, companies must make big investments in sales and marketing. Last year, Liepin signed a sponsorship deal with the famous Chinese actor Hu Ge. The company spent USD 73 million in sales and marketing, which equals to more than half of its revenue last year.

Uxin

This Chinese used car selling platform features Leonardo di Caprio in its advertisements that are ubiquitous in the Asian nation. The group was officially listed on Nasdaq on June 27th , with a stock price of USD 9 per share. The company also issued convertible bonds. The company´s main source of revenue is financial services for cars. According to the consulting firm iResearch, the company controls 41 percent of the market in terms of gross merchandise value.

China Renaissance

This financial firm, known in China as Huaxing, handed its prospectus on June 25th. The press finally got a glimpse of the vital stats of the company, which has always kept a low profile. Huaxing reaped revenue worth USD 200 million in 2017 and USD 92 million in 2018 Q1. In the same periods, profits reached USD 58 million and 35 million respectively.

The company is mainly focused on financial consulting services, which are its forte. In 2015, 2016 and 2017 these services generated revenue of USD 112 million, 106 million and 107 million respectively, up to 70% of its total income in those three years.

Inke

This live video streaming app from China had failed to get listed in Mainland China three years ago along with Shunya Group, a garment company. It independently launched an IPO in Hong Kong. The company is expected to get listed on July 12th and is expected to raise around HKD 1 billion (USD 127 million), which, the company says, will be used to “enrich its content, launch marketing promotions and make strategic investments”.

Huya is one of Inke´s competitors that got listed in New York at a valuation of USD 3 billion. On the first day, it had a stock price of USD 12 per share but it reached USD 35 just a month later. Will Inke replicate Huya’s growth? Although both companies are live-streaming apps, Huya is more focused on videogames and live broadcast of e-sports. Inke is more focused on celebrities, and fashion shows. Inke insiders however believe that their company has a much larger growth space than their rival.

Meituan

After months of rumors, the gigantic Meituan Group will be listed in Hong Kong after September. The group’s CEO Wang Xing has been flying between Beijing and Hong Kong in the last weeks preparing for the IPO.

According to Meituan sources, the company submitted its prospectus last June 25th. Last year, its food delivery department had a gross merchandise value of USD 25 billion and its valuation is expected to touch USD 60 billion. If it does, Meituan would effectively become the fourth Chinese tech giant after BAT (Baidu, Alibaba and Tencent). Meituan’s services span from hotels and group-buying to travel and cinemas. Meituan acquired the shared-bikes company Mobike and launched its online car-hailing service in Shanghai in 2018.

China Tower

The world’s largest mobile mast operator was founded by the public companies China Mobile, China Telecom and China Unicom in July of 2014 with a capital of USD 1.5 billion. It handed its prospectus earlier on May 14th in Hong Kong.

China Mobile, China Telecom, China Unicom and China Reforms Holding Corporation control 38%, 28.1%, 27.9% and 6% of the stocks respectively. After the IPO, China Mobile will remain as the only big shareholder. China Tower saw a profit of almost USD 2 billion in 2017, 20 times more than the previous year. According to the Hong Kong newspaper Dagongbao, China Tower´s valuation could reach USD 6 billion and could get listed at the end of July. However South China Morning Post claims that the figure could reach USD 10 billion, becoming the fourth largest in Hong Kong´s history.

Xiaomi

Xiaomi handed its prospectus on May 3rd ,beginning the long process of its IPO. Xiaomi will get listed as “Xiaomi Group”, which will include many different sub-companies. Xiaomi will use a dual class stock structure. On June 29th, its stock price was set at HKD 17 per share at a valuation of USD 54 billion, less than expected. Initial estimates set the valuation at USD 100 billion, almost twice as much as the final valuation. Investors and Xiaomi seem to disagree in regarding Xiaomi as an Internet company, which is what Xiaomi claims to be.

According to Xiaomi´s prospectus, investors are not wrong. Xiaomi´s revenue from hardware sales represent 90 percent of the total revenue. Internet services only account for 8.6 percent.

Contemporary Amperex Technology Limited (CATL)

This battery manufacturer was listed in Shenzhen last June at a valuation of USD 11 billion. This company, founded in Fujian province, is the world leader in the batteries field and it is focused on clean energy. Nobody sold more batteries than CATL in 2017, controlling 17 percent of the global market. Profits reached USD 584 million

Foxconn

Foxconn is the world's largest contract maker of electronics. It was listed in China on June 8th. During its first day, stock value grew by 44%. Foxconn is the largest technological company in the Chinese stock markets. Later in June, stock markets in China suffered huge losses and Foxconn fell by 22 percent during the last week of June. If this trend continues, Foxconn will go back to its initial value, sending worrying signals to other unicorns considering being listed in Mainland China.

Tongcheng Elong

This company chose Hong Kong for its IPO. This online travel agency, backed by Tencent and Ctrip (its largest and second largest shareholders respectively) handed its prospectus on June 21st. Tongcheng Elong was born after the merger between Tongcheng and Elong towards the end of 2017. According to iResearch Consulting Group, Tongcheng Elong is the third largest online travel agency in the Chinese domestic market. The company focuses on transportation tickets and hotel reservations.

Pinduoduo

It is rumored in the Chinese media that Pinduoduo is planning its IPO in the US but this has been denied by the company. This Wechat mini program was rumored to be able to reach a valuation of USD 30 billion. Its business model is based on group-buying on Wechat, where users convince friends, colleagues or neighbors to buy the same products in large quantities with a discount. In the last three years, Pinduoduo has completed four financing rounds and is backed by capital firms such as Gaorong Capital, New Horizon Capital, Tencent and Light Speed Capital. Pinduoduo has 300 million users.

U51

U51 chose Hong Kong for its IPO. It will be listed with a stock price of around HKD 10 per share. This fintech company gives loans and credit cards and has been profitable for two years in a row. In 2016 and 2017 profits reached USD 8 million and 112 million respectively. The company has launched a series of apps, hoping to build a fintech ecosystem.

Babytree

Babytree handed its prospectus in Hong Kong on June 28th. According to it, this company, which focuses on parents and how to raise kids, had revenue of USD 110 million in 2017, but this was not enough to be profitable. It reported losses of USD 137 million. 96 percent of its revenue came from advertising and e-commerce.

iQiyi

Also known as the “Chinese Netflix”, iQiyi was listed on Nasdaq in March at a valuation of USD 11 billion. Its IPO was the second largest for a Chinese company in the US, second only to Alibaba’s in 2014.

According to its financial report, iQiyi generated revenue of USD 700 million and profits reached USD 63 million during 2018 Q1, a totally different picture since the same period last year when it had reported losses. Gong Yu, its founder, recently declared: “While we become more and more known around the world, our cooperation and partnership possibilities keep growing, our IPO provides an exciting base for our future development”.

Huya

As mentioned above, Huya is one of Inke´s competitors in the live-streaming industry. It was listed in New York on May 11th. According to the consulting firm Frost & Sullivan, Huya had 86 million active users at the end of 2017. On an average each user spent 99 minutes per day on the app, with a monthly retention of 70 percent. However, Huya reported losses of USD 15 million in 2017, while Douyu, one of its competitors, was profitable that same year.

This year things started to change for Huya as it had profits of USD 5 million in the first quarter of 2018.

Bilibili

Bilibili started off as a video portal similar to iQiyi but later shifted focus on new fields such as video games. It got listed in Nasdaq on March 28th and fared badly on its debut day with its stock value plummeting by almost 15%, before gaining marginal recovery. Bilibili seems to lack the confidence of US investors, who are perhaps not able to understand this company in which video games accounted for 83% of its revenue last year.

A. Alfaro

A. Alfaro is a Beijing-based freelance reporter. He focuses on China's politics, culture and society. He can be reached at varofaro@gmail.com. 

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