Chinese cloud services provider UCloud Technology has raised about 1.944 billion yuan ($284 million) in an initial public offering (IPO) on the STAR Market on Monday, becoming the first company with a dual-class share structure to float shares in the mainland.
Shanghai-based UCloud offered 58.5 million shares at a price of 33.23 yuan ($4.84) apiece, boosting market capitalization of around 14.041 billion yuan ($2.05 billion). The net amount raised in the IPO was 1.840 billion yuan ($269 million) after deducting the issuance costs.
The IPO made UCloud the first listed company with a dual-class share structure on the mainland stock market. The dual-class share structure, which is commonly seen in technology companies including Facebook, Alibaba Group, and JD.com, uses shareholding structures with unequal voting rights that enables the founder to retain control of the company after the IPO.
UCloud received a go-ahead to list on the new high-tech board from the China Securities and Regulatory Commission (CSRC) on December 20, 2019, according to a CSRC statement.
As one of Beijing’s attempts to stem an exodus of domestic technology firms listing overseas, the STAR Market opened for trading in July 2019 under a new IPO mechanism based on a Nasdaq-style registration system rather than one that requires detailed regulatory approval for every listing. The bourse is currently the only market in mainland China that allows companies with dual-class share structure to go public.
Hong Kong Exchanges and Clearing Ltd, which operates the stock exchange in Hong Kong, also reversed its ban on companies with weighted voting rights in April 2018.
Established in 2012, UCloud operates as a cloud computing service platform that develops and delivers infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS) product, among others. The company now owns 32 data centres across 25 countries and regions, including mainland China, Hong Kong, Macau, Taiwan, Europe, America and Southeast Asia. Its serves corporate clients in the fields of internet, new retail, manufacturing, gaming, and finance.
The revenue of UCloud stood at 516 million yuan, 840 million yuan and 1.19 billion yuan ($173 million) from 2016 to 2018, while its net profit was -211 million yuan, 59 million yuan, and 77 million yuan ($11 million) in the three years, respectively, according to its prospectus. The company recorded 699 million yuan ($102 million) in revenue in the first six months in 2019, compared to a net profit of 7.78 million yuan ($1.13 million) during the same period.
As shown in the prospectus, UCloud generated nearly 81 per cent of revenue from the public cloud business and 16 per cent of revenue from its hybrid cloud offerings in the first half of 2019.
China’s public cloud service market – composed of infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS) – reached nearly $7.19 billion in 2018 and is projected to hit $27.53 billion in 2022 with a compound annual growth rate (CAGR) of 39.91 per cent, according to a report released by International Data Corporation (IDC).
The rapid growth is mainly driven by the government support and non-internet sectors as they are accelerating cloud service adoption to deepen digital transformation, as per the report.