Alibaba-backed Baozun prices US$110 million IPO, below expectations

PUBLISHED : Thursday, 21 May, 2015, 12:48pm
UPDATED : Thursday, 21 May, 2015, 12:48pm

Chinese e-commerce company Baozun, backed by Alibaba Group, raised US$110 million in a US share offering, less than investors had initially expected, after pricing the deal below its own indicative range.

The company sold 11 million American Depository Shares at a price of US$10 each, less than the US$12 to US$14 per share range, according to a term sheet of the deal.

E-commerce giant Alibaba is Baozun's largest investor with a 23.5 per cent stake, according to the IPO prospectus.

Ahead of the offering, analysts had predicted a strong performance by the Shanghai-based company, which provides logistics services to help large brands sell products online.

"The old saying is that during a gold rush, you're more likely to get rich selling shovels than digging for gold," said Hunter Williams, associate partner at OC&C Strategy Consultants.

"Baozun is selling shovels in the gold rush that is Chinese e-commerce."

E-commerce sales in China hit 12.3 trillion yuan in 2014, up 21.3 per cent from 2013, according to Beijing-based market research firm iResearch.

Baozun had a 20 per cent market share by transaction value in 2014 in China, according to iResearch Consulting Group, a Chinese research firm. The firm counts Microsoft, Philips and Nike among its partners.

The company is "not the only competitor in this space", Williams warned.

"One challenge facing all these players will be how to differentiate themselves or push into more value-added services, rather than just offering commoditised outsourcing."

Baozun did not immediately respond to a request for comment on the IPO pricing.