China’s car trading platform Chehaoduo Group, backed by SoftBank Vision Fund, is exploring options to raise several hundred million dollars after auto sales took a hit in the coronavirus outbreak, according to people familiar with the matter.
The company is studying possibilities including equity fundraising and asset-backed securities issuance, said the people, who asked not to be identified as the discussions are private. The car platform is also considering seeking support from local government, one of the people said.
Chehaodou, which means “a lot of cars” in Chinese, is arranging virtual meetings with potential investors, the people said. Deliberations are ongoing and the company hasn’t made any final decisions on the fundraising plans, they said.
A funding round could come after auto sales in China slumped on the coronavirus pandemic, although potential buyers are gradually returning to showrooms as the country loosens travel restrictions and rolls out subsidies. Chehaoduo is looking for fresh capital to bankroll its expansion in the car services market, one of the people said.
Chehaoduo has worked with local governments before. In 2018, it received 3 billion yuan ($423 million) in funding from the city government of Kunshan, where it set up the headquarters for one of its units, local media reported at the time.
Backed by 58.com Inc., which operates China’s largest classified online marketplace, Chehaoduo is also weighing an initial public offering in late 2020, the people said. Hong Kong or the U.S. are among the potential listing venues, one of them said.
Chehaoduo said in a statement that it’s in the process of fundraising, declining to comment further.
Chehaoduo runs online automotive retail businesses including used car trading platform Guazi.com, which was launched in 2015, and Maodou.com, an online new car marketplace set up in 2017, 58.com’s 2018 annual report said. They also provide post-sales maintenance services, financing and insurance solutions in over 200 cities across China, said the report.
The company announced in October 2018 on its official WeChat account that its valuation had reached $6.6 billion after completing a so-called C plus round of capital raising. Five months later, the firm said it had raised another $1.5 billion from SoftBank Vision Fund, valuing it at more than $9 billion.
The platform counts an array of private equity firms as its investors including Capital Today China, Yunfeng Capital, FountainVest Partners and IDG Capital. 58.com, which has long been one of Chehaoduo’s key backers, said in its 2018 annual report that it was in a process to sell down its holding in the company to roughly 8% from 19.1%.
58.com plans to acquire the business-to-business online second-hand car auction unit of Chehaoduo’s major market rival Uxin Ltd. for $105 million, according to an announcement by Uxin on March 24.