The big Chinese IPOs to watch out for in 2020

Photo: Ucommune

Amid China’s economic slowdown and unsettled trade tensions with the U.S. that have weighed on Chinese firms’ fundraising activities, Chinese companies have raised a combined $30.824 billion through cross-border initial public offerings (IPOs) in 2019, about 31 per cent lower than the full-year total for 2018, according to Baker McKenzie.

Among IPOs on bourses in Hong Kong, London and the United States, Chinese issuers choosing to list on Nasdaq rose by 35 per cent in the past year, but capital raised has declined by 48 per cent from $5.7 billion in 2018 to $3.0 billion in 2019. Domestic IPOs, in comparison, recorded increases across capital raised and issues with rises of 58 per cent and 77 per cent, respectively.

Domestic and cross-border IPOs by Chinese issuers in 2019

Activity in the global IPO market in 2020, says the US-based multinational law firm, is set to remain subdued with the threat of a downturn further enhanced by China-US trade tensions, Hong Kong political unrest, the Brexit saga, and the upcoming 2020 U.S. Presidential election. Even so, here are some of the largest Chinese IPOs expected to come in 2020:

1. Ucommune Group Holdings

Founding time: 2015

Industry: Shared office operation

Valuation: $3 billion

Estimated IPO size: $100 million (a placeholder likely to change)

File date: December 2019

China’s largest shared workplace provider Ucommune is expected to make its market debut on the New York Stock Exchange in January, under the ticker ‘UK’.

Ucommune filed a prospectus with the US securities regulator in December for an IPO, just months after its US-based peer WeWork’s spectacular failed attempt, and despite major bankers Citigroup, Credit Suisse Group and Bank of America withdrawing their support for the listing reportedly over the issue of valuations. 

The Beijing-headquartered company, which was founded as UrWork, has 200 co-working locations across more than 40 cities worldwide, including in New York, Los Angeles, Hong Kong and Singapore. For the nine months to September 30, 2019, Ucommune booked a net loss of 572.8 million yuan ($81 million) on the back of 874.6 million yuan in revenue, according to its prospectus. 

Prior to its IPO application, Ucommune had embarked on an aggressive expansion, acquiring at least six domestic competitors, including Wedo, Woo Space, and Workingdom. The company has also garnered at least 20 rounds of investments since its inception in 2015. 

It was valued at $3 billion after a $200-million Series D round in November 2018 – the latest data confirmed by the company. The round was led by Hong Kong’s All Star Investments, and included Chinese investment bank CEC Capital. Other backers included RockTree Capital, Sequoia Capital, and Ant Financial. 

2. Kingsoft Cloud Holdings Limited

Founding time: 2012

Industry: Cloud computing

Valuation: $2.373 billion

Estimated IPO size: Up to $500 million

File date: Unknown

Kingsoft Cloud, the cloud computing unit of Chinese software giant Kingsoft, has spun off from the parent company to mull an IPO in the United States, Kingsoft revealed in a statement last December.

Kingsoft Cloud already submitted a draft registration statement for a potential IPO to the US Securities and Exchange Commission (SEC) on December 20, 2019 (New York time), and became a non-wholly owned subsidiary of Kingsoft, said the Hong Kong-listed parent company in a statement filed with the stock exchange on December 22.

The cloud computing unit is expected to raise up to $500 million in the IPO, according to Chinese online investment and communication portal Snowball Finance. Kingsoft Cloud could become Kingsoft’s third affiliate to go public, after New York-listed mobile internet firm Cheetah Mobile, and Kingsoft Office Software, which raised 4.5 billion yuan ($645 million) on China’s Nasdaq-style STAR Market last November.

Kingsoft Cloud was established in 2012 to offer cloud storage and cloud computing services, including cloud servers, physical cloud hosting, relational database services, cloud security and others for companies in the fields of entertainment, finance, medical treatment and government affairs.

The revenue contributed by the cloud service reached 976.3 million yuan ($140 million) with a year-on-year (YoY) increase of 62 per cent, accounting for 48.5 per cent of total revenue, according to Kingsoft’s financial report in the third quarter of 2019.

Kingsoft Cloud reached a valuation of $2.373 billion after it received $720 million in a Series D round of financing in January 2018 – the latest valuation confirmed by the company on the official website. The firm also landed another $50 million in a Series D+ round led by China Internet Investment Fund (CIIFund) in early December 2019.

3. Smoore International Holdings Limited

Founding time: 2006

Industry: Electronic cigarette

Valuation: 18 billion yuan ($2.58 billion)

Estimated IPO size: Unknown

File date: December 2019

Chinese vaping device manufacturer Smoore has filed for an IPO in Hong Kong last December, less than two months after the country’s regulator urged merchants to stop selling and advertising electronic cigarettes online out of juvenile protection.

Smoore, the world’s largest vaping device maker in terms of revenue in 2018, is yet to reveal the pricing terms and size of the listing. The prospectus that it filed with the stock exchange was heavily redacted.

The company was set up in 2006 to research, design and manufacture closed system vaping devices and components for tobacco companies and vaping companies worldwide, such as Japan Tobacco, British American Tobacco, Reynolds Asia Pacific, Chinese e-cigarette brand RELX and America’s NJOY. It also offers open-system vaping devices, or APVs, as well as components and accessories for retail clients under self-owned brands: Vaporesso, Renova, and Revenant Vape.

In December 2015, Smoore went public on the National Equities Exchange and Quotations (NEEQ), an over-the-counter market in mainland China known as “the new third board.” It was delisted from the bourse on June 5, 2019, due to “consideration of the capital market development and the firm’s business development plan,” Smoore disclosed in a filing with the domestic stock exchange on June 4.

The company is eyeing a Hong Kong IPO after China’s tobacco regulator issued a notice on November 1, asking e-commerce platforms to close all online stores that offer e-cigarette products in order to “further strengthen the protection of the physical and mental health of minors.”

4. Beike Zhaofang

Founding time: 2018

Industry: Online property brokerage

Valuation: Over $10 billion

Estimated IPO size: At least $1 billion

File date: Unknown

Apart from the above filed IPOs, there is potentially another sizeable IPO from China – Beike Zhaofang, an online property brokerage platform backed by the country’s social and gaming giant Tencent Holdings. 

The Chinese housing agent is considering a listing that could raise at least $1 billion, according to people familiar with the matter as first reported by Bloomberg. However, the company has yet to decide on a listing venue.

Beike, which translates to “shells” in Chinese, was started in 2018 by one of China’s largest real estate agencies, Beijing Homelink Real Estate Brokerage (Lianjia). It offers brokerage and financial services to renters and homebuyers. In March 2019, the company secured $800 million from Tencent in a Series D funding round that valued it at over $10 billion.

5. Lixiang Automotive/CHJ Automotive

Founding time: 2015

Industry: Electric Vehicle

Valuation: $2.93 billion

Estimated IPO size: At least $500 million

File date: December 2019

Chinese electric vehicle maker Lixiang Automotive has confidentially filed for an IPO in the United States to raise at least $500 million, Reuters reported.

Lixiang Automotive, which filed for the IPO last December, is expected to go public as early as the first half of 2020, said the people. The company has been working on the listing plan since last summer and hired Goldman Sachs as the main bank leading the deal, the report added.

Lixiang Automotive, also known as CHJ Automotive, was founded in July 2015 by Chinese entrepreneur Li Xiang. The company secured $530 million in a Series C round of financing led by Wang Xiang, CEO of Chinese on-demand service provider Meituan-Dianping, in August 2019. The previous round valued the company at $2.93 billion.

If the IPO proceeds, the company would become the second Chinese EV startup to list in New York after Nio Inc’s $1 billion IPO in 2018. The domestic fellow, which suffers from years of mounting losses since its inception in 2014, posted a smaller-than-expected loss of 2.38 yuan per share in the third quarter of 2019, compared with the average analyst estimate of 2.43 yuan.

6. MINISO

Founding time: 2013

Industry: Budget household and consumer goods

Valuation: 15 billion yuan ($2.15 billion)

Estimated IPO size: $1 billion

File date: Unknown

MINISO, a Chinese budget household and consumer goods retailer, is planning an IPO in Hong Kong or the United States that could raise about US$1 billion, according to sources cited by Bloomberg.

The company was inviting banks to pitch for roles on the proposed offering last June, while the timeline was yet to be decided, said the sources.

MINISO was founded by Japanese designer Miyake Junya and Chinese entrepreneur Ye Guofu in 2013. The company, which mainly targets consumers aged between 18 and 35, has over 3,500 stores across more than 80 countries and regions including China, the U.S., Canada, Russia, Singapore, South Korea, Malaysia, and the United Arab Emirates, according to its website. The company posted a revenue of over $2.5 billion in 2018.

The company secured 1 billion yuan ($143 million) in its first external financing round from Tencent and Hillhouse Capital Group in September 2018. It was valued at 15 billion yuan ($2.15 billion) by the Hurun Global Unicorn List 2019.

7. Blue Moon

Founding time: 1992

Industry: Laundry detergent

Valuation: Unknown

Estimated IPO size: $400 million

File date: Unknown

Chinese laundry detergent product brand Blue Moon is planning to raise $400 million in an IPO on the Hong Kong stock exchange in 2020, according to Reuters IFR. The company was reportedly in talks with advisors about the new share issuance.

Blue Moon, founded in 1992, claims to be the largest player in the Chinese laundry detergent market in terms of the market share in the past 10 years, shows the company website. The company also develops, manufactures and sells detergent products for the cleaning of toilets, tableware, kitchen ventilators, as well as fruits and vegetables.

In Blue Moon’s only one investment publicized since its inception, the company raised capital from Asia-focused private equity firm Hillhouse Capital Group, and China’s Charisma Partner, which specializes in private equity investments in the consumption industry, in December 2011. Financial details of the round were not disclosed.

The potential IPO of Blue Moon could become another prominent exit of Hillhouse Capital Group after the China-based investment company enjoyed the IPO of its portfolio firm Topsports International Holdings Limited in 2019. Topsports, the sportswear business of Chinese footwear retailer Belle International, raised HK$7.9 billion ($1 billion) in an IPO on the Hong Kong bourse last October.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.