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Explainer | Didi and ByteDance among Top 10 IPOs by China’s billion-dollar tech start-ups to watch for in 2021

  • China contributed 23 per cent of the 611 unicorns in the world, collectively worth over US$2 trillion as of March
  • A record 143 mainland Chinese companies completed an IPO in the first three months of this year, amassing US$23.6 billion of funds
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ByteDance’s Chinese short-video platform Douyin and ride-hailing application Didi Chuxing are among the horde of fast-growing Chinese technology companies stampeding to raise funds through initial public offerings (IPOs) while global stock markets trade close to record highs. 
Wall Street, Hong Kong and Shanghai are all lassoing some of the world’s most innovative companies, boosting trading volume on their exchanges and garnering listing fees. For entrepreneurs, the world’s deepest pools of publicly traded capital are valuing their businesses higher than private-market investors. 

Hong Kong’s head of listings Bonnie Chan pointed to another blockbuster year, saying that the world’s favourite market for IPOs in eight of the past 12 years “will be as busy, if not more busy this year” than in 2020, based on the pipeline of companies queuing up to float their shares in the city during a March interview with Bloomberg. 

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China is the world’s second-biggest home for unicorns, as the privately owned companies worth over US$1 billion are called, after the United States. China contributed 23 per cent of the 611 unicorns in the world, collectively worth over US$2 trillion as of March, according to private markets data compiler CB Insights.

ByteDance and Didi regularly feature in lists of the planet’s most valuable companies still in private hands. A record 143 mainland Chinese companies completed an IPO in the first three months of this year, according to Refinitiv, amassing US$23.6 billion of financial firepower to grow organically or via acquisitions. The next highest volume for the first quarter was US$17.4 billion in 2010.

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Regulators are on guard for some unicorns looking to jump the gun in their rush to tap investors while stock market valuations remain high, with China’s securities watchdog saying it would simply stop the IPO of any “sick” company trying to force its way through to IPO in Shanghai or Shenzhen.

China’s booming consumer market is good fodder for unicorns that specialise in business model innovation, typically improving user experience rather than a leap forward in technology. However, as Beijing spends more on research and development to boost the country’s self-sufficiency and challenge the US’s hi-tech supremacy, start-ups in the fields of artificial intelligence, hardware and biotechnology are multiplying. 

Counter-intuitively, some Chinese entrepreneurs continue to seek listings in the world’s largest capital market in New York despite US-China trade tensions including the unicorns Huohua Siwei and Hello TransTech.

Most remain sanguine about the US starting to implement the Holding Foreign Companies Accountable Act to remove companies from US exchanges if American auditors cannot inspect the issuer’s accounts for three consecutive years, said people familiar with their thinking. Any delisting – if it happens at all – is seen to be years away, giving US and Chinese regulators time to reach a compromise. The prevailing view is that a Hong Kong secondary listing is always available as the fail-safe.

Shanghai’s Star Market for hi-tech companies is the up-and-coming destination for fast-growing Chinese companies, such as WM Motors and Megvii. It welcomes unprofitable companies, red chips and companies with weighted voting rights. 

The rush to list may well have something to do with the fear of missing out, stirred by stock-market Cassandras. Guo Shuqing, China’s banking regulator, said he was “worried” on March 2 that the foreign financial asset bubble would burst.
Many of the would-be market debutants are backed by China’s largest privately owned digital platforms such as Tencent Holdings and Alibaba Group Holding, which owns the South China Morning Post.
Our “Top 10” selection builds in sector diversity, from online education to computer vision companies. Transport is heavily represented as the internet upends old business models and China supports a shift to electric vehicles. We have excluded fintech giant Ant Group as timing and valuation remain too uncertain. Executives at the Hangzhou-headquartered firm said they plan to resubmit an IPO application once it is in full compliance with new fintech rules in China. To be sure, the IPOs’ size and timing depend on market conditions and regulatory approval. The largest IPOs are listed in ascending order, combining valuation and interest for potential investors, using CBInsights’ data unless otherwise specified. 

Here are the top 10 largest Chinese technology companies likely to launch an IPO this year. 

E-learning took off during the coronavirus pandemic as schools closed. Photo: Shutterstock

No. 10 Huohua Siwei

The online education platform for children aged 3 to 12 years is seeking an IPO in the US, according to a person familiar with the matter. Known as Spark Education in English, the Beijing-headquartered company specialises in mathematics, science and language courses. 

When the coronavirus pandemic forced schoolrooms to close, worried parents flocked to e-learning platforms. Huohua Siwei has already raised US$590 million over nine rounds since it was founded in 2017 by Lou Jian. It counts Tencent, KKR, Sequoia Capital China, GGV Capital and short-video app Kuaishou Technology among its shareholders. 

Huohua Siwei earns 200 million yuan (US$30.5 million) from monthly fees paid by 250,000 students, Lou said in September. It employs over 4,200 teachers and roughly 1,000 R&D staff.

Patients turned to online consultations during lockdowns to avoid overcrowded hospitals. Photo: Shutterstock

No. 9 We Doctor 

We Doctor is seeking to raise over US$1 billion in Hong Kong, according to a person familiar with the matter. 

Consultations with the family doctor via video conferencing software like Zoom became commonplace during the Covid-19 pandemic. Consumers signed up in droves to apps linking them with general practitioners, while investors drove health care companies’ share prices higher.
The Hangzhou-based firm’s platform connected with over 7,800 hospitals and had about 222 million users as of December, according to its listing prospectus. Citigroup and CMB International are sponsoring the share sale.
Hello TransTech, a survivor of China’s bike-sharing bubble. Photo: Facebook

No. 8 Hello TransTech 

The bicycle-sharing platform is preparing for a US IPO, according to a person familiar with the matter. 

Hello TransTech’s bicycles sport a blue-and-white livery and can be found in more than 460 cities in China, according to its website. The company has signed up about 400 million registered users.

The Shanghai-headquartered firm backed by Ant Group has raised US$2.2 billion in equity over 13 rounds since it was founded in 2016, and was valued at US$5 billion post-money during its Series G funding round in 2018.

Formerly known as Hellobike, the firm is a survivor of China’s bike-sharing bubble that popped between 2017 and 2018.

Hello TransTech is led by Yang Lei and Li Kaizu and competes against Didi and Meituan in bike-sharing. It said in October it would also compete with Didi head-on in taxi-hailing.

WM Motor is. Photo: WM Motor

No. 7 WM Motor Technology 

The electric-car maker embarked on a process to list in Shanghai last year. WM Motor is discussing with Chinese regulators the timing of its IPO, likely to make its debut in the first half, according to a person familiar with the matter.
The company, which designs, manufactures and sells affordable battery-run EVs under the Weltmeister brand, recruited mainland brokerage China Securities to prepare for the IPO on September 30.
Unlike its peers NIO and Xpeng, which chose to list in the US, Shanghai-headquartered WM Motor was always likely to plumb for a local listing, given it has received considerable hometown government support. WM Motor has raised a total of US$5.5 billion across five rounds, backed by Tencent and Sequoia. The Shanghai-based company was valued at about US$5 billion post-money during its Series C round in 2019.

Founded in 2015 by former Geely and Volvo executive Freeman Shen Hui, WM Motor has an assembly in the Zhejiang manufacturing hub of Wenzhou, with another facility under construction in Huanggang of Hubei province.

Megvii, at the cutting edge of facial-recognition technology. Photo: Simon Song

No. 6 Megvii Technology

One of the world’s foremost developers of facial recognition technology is planning to list in Shanghai to bankroll its development of artificial intelligence
The Beijing-based owner of facial-recognition software Face++ is on track to raise 6.02 billion yuan after fees, according to a filing with the Shanghai Stock Exchange. Citic Securities is sponsoring Megvii’s IPO.

Founded by three Tsinghua University graduates in 2011, the Cayman Islands-registered company is issuing 253 million Class B shares, or not less than 10 per cent of its enlarged capital. 

Megvii attempted to list in Hong Kong in August 2019 but let its application lapse in February 2020 after the Trump administration included it in an October 2019 trade blacklist

Megvii was last valued at more than US$4 billion post-money after raising US$750 million in 2019.

A farmer opens a bag of Syngenta’s corn seed to load into planter in Princeton, Illinois, US Photo: Bloomberg

No. 5 Syngenta Group

The Swiss agrichemicals giant is on track for an IPO by mid 2022 in Shanghai, according to people familiar with the matter. 

China approved the merger of Syngenta’s shareholder China National Chemical Corporation (ChemChina) with Sinochem in April, creating the world’s largest industrial chemicals firm and alleviating ChemChina’s debt burden. ChemChina’s acquisition of Syngenta in May 2017 remains the largest Chinese foreign takeover in history. ChemChina committed to floating Syngenta within five years of closing the US$43 billion acquisition in 2017. 

Why is Syngenta included among technology companies? The Basel-based company is at the cutting edge of biotechnology, developing the first genetically modified cereal for human consumption, and it fully sequenced the DNA of the rice genome in 2001. 

Investors will mull over the ramifications of the Pentagon adding ChemChina to a blacklist of companies in August that it said have connections to the Chinese military. 

Workers sort out packages for delivery at JD’s Yizhuang Smart Delivery Station in Beijing, China, on November 11, 2020, aka Singles’ Day shopping festival. Photo: Simon Song

No. 4 JD Logistics 

The logistics unit of Chinese e-commerce giant JD.com is set to sell its shares in Hong Kong. Bank of America, Goldman Sachs and Haitong International are handling the sale. UBS is the financial adviser, according to its prospectus.
Ahead of the spin-off, JD.com owns 79.12 per cent of JD Logistics, the largest supply-chain services provider by revenue in China. Last year it served more than 190,000 corporate customers. While revenues are growing swiftly, it remains an unprofitable company. 
JD Logistics’ value was on display during Singles’ Day, the world’s largest online shopping extravaganza, held between November 1 and 11 last year. Shoppers bought a record 271.5 billion yuan of merchandise on JD.com and turned to the logistics service en masse for delivery. Alibaba reported 498.2 billion yuan in gross merchandise value (GMV) through its Taobao, Tmall Global and AliExpress platforms.
A man stands near a giant sign of Chinese company ByteDance’s app TikTok, known locally as Douyin, during China Fashion Week, in Beijing, China March 31, 2021. Photo: Reuters

No. 3 Douyin

ByteDance, China’s most valuable unicorn, may sell shares in short-video platform Douyin, the smaller version of TikTok that serves customers outside China, according to a source familiar with the plan. The plan is tentative and could change as ByteDance weighs options, the person said.
ByteDance could pick New York or Hong Kong to list Douyin. The possibility of a US listing has gained traction since Joe Biden was elected US president, according to the source. ByteDance could follow a US listing with a secondary listing in Hong Kong.
Douyin reported 600 million daily active users as of August 2020. Douyin is making headway in the domestic e-commerce market, tripling its GMV, or the total value of products sold, to 500 billion yuan last year, a fifth of which came from its own e-commerce channel, according to LatePost. Twelve of China’s top 50 e-commerce live-streamers sell on Douyin, according to Pangqiu Data. Luo Yonghao, the No 1 live-streaming seller on Douyin, sold 400 million yuan of products in March.
Didi Chuxing app. Photo: Getty Images

No. 2 Didi Chuxing

China’s largest ride-hailing company is the runner up on our list as the most valuable and innovative unicorn heading towards a listing. Led by founder and CEO Will Cheng, Didi has become a major player in the gig economy with over 30 million drivers in 2020. 

The unicorn has filed confidentially to list on NYSE according to a person familiar with the matter. It may pursue a secondary listing in Hong Kong in the future, the person said. Two listings would allow Didi to tap both pools of capital.

At least some of its 32 investors will be itching to exit after Didi’s 19 rounds of fundraising, the highest number of rounds among unicorns on this list. The Beijing-headquartered company has raised US$19.2 billion of capital in private markets since it was founded in 2012. Didi counts SoftBank, Tencent and Alibaba among shareholders, as well as Toyota Motor, Uber and Booking Holdings. 

When Didi does list, it will be sure to turn heads with its size. In a 2019 fundraising the company’s post-money valuation hit US$62 billion, up from US$56 billion in 2018. 

Didi’s core ride-hailing business was profitable, an executive said in May, so the time may be ripe to make the leap and finally float. 

Photo: Reuters

No. 1 ByteDance

Another option for Beijing-based ByteDance is to list the whole group, instead of just Douyin.

ByteDance is the world’s first and only hectocorn, a privately held start-up valued at over US$100 billion. ByteDance was valued at about US$140 billion post-money during its 2020 fundraising when Tiger Global Management backed the firm. It was founded in 2012 and counts some of the world’s biggest venture capital funds as investors, including SoftBank, General Atlantic and Sequoia. ByteDance has amassed about US$4.4 billion across 11 fundraising rounds.

ByteDance said in a statement on April 23 that it is not yet ready to file for an IPO, at least for the time being.
Led by serial entrepreneur Zhang Yiming, ByteDance operates a broad portfolio of businesses including the viral short-form mobile video app TikTok, and its China-only version Douyin, the content discovery platform Toutiao, social media service Helo, work tools business Lark and platform services firm BytePlus.

ByteDance’s 2020 revenue reached US$37 billion, four times larger than smaller rival Kuaishou, The Information reported in January

In a signal that the business is maturing and diversifying its capital structure, Caymen Islands-domiciled ByteDance took out a US$1.3 billion loan from HSBC, Goldman Sachs, Bank of America and other banks in 2019. It recently hired Chew Shou Zi from smartphone maker Xiaomi as chief financial officer.
However, the company continues to deal with headwinds overseas. India banned TikTok along with dozens of other Chinese apps last year on national security grounds, the same reason the US used to try to force ByteDance to sell the app in the country, an issue that remains unsettled. ByteDance products are available in over 150 markets and as of 2019 it had over 60,000 employees, according to its website.

Additional reporting by Enoch Yiu 






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