The past few years have witnessed a surge in China’s tech unicorns angling for a public listing. Last year, 137 Chinese firms went public, with 16 of those listing on U.S. exchanges and collectively raising $3.4 billion.
This year, the Chinese IPO pipeline remains robust with a flurry of activity expected in the latter half of the year.
The only word of caution is this: China is on a mission to give a major boost to its tech unicorns, and to do this it's launched six mutual funds to raise money for them. But some worry that this could reduce short-term market liquidity and result in significant volatility.
But our bet is that no one will heed that caution because these IPOs are simply too alluring.
Here are five of the largest mega-funded Chinese firms that are expected to IPO this year:
#1 Meituan Dianping
Meituan Dianping is possibly one of the biggest Chinese companies you have never heard of.
The company is a giant app that offers a hodgepodge of services including business listings and ratings like Yelp, food delivery like Postmates, flight tickets and hotel rooms like Expedia, an Uber-esque ride-hailing service and even options to book wedding planners, babysitters and housekeepers.
And it’s a big, big business, with gross transaction volume reaching $55 billion last year. Meituan has also been growing like a weed, with revenues soaring 750 percent between 2015 and 2017 to hit 33.9 billion yuan (about $5.2 billion).
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Meituan promises to be one of the year’s blockbuster IPOs and just filed to go public on the Hong Kong Stock Exchange and targeting a $4-$6-billion offering that will value the company at $60 billion. That would more than double its valuation from October last year and makes for a very enticing play for investors looking for a new opportunity. Related: This Payments Giant Just Teamed Up With Mastercard
Even though it’s on a revenue binge, managing to more than double its revenue last year and bring on a massive 320 million active users, it’s still losing money, but losses among tech unicorns don’t seem to bother investors these days.
According to Meituan’s IPO documents, last year it posted an adjusted net loss of about $430 million, which is about half the loss it reported for the previous year. That’s what investors will be looking for.
#2 Ant Financial
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Source: Bloomberg
Formerly Alibaba-owned, Ant Financial is the world’s largest fintech unicorn and operator of China’s most popular mobile payment app, Alipay.
Ant’s revenue stream spans consumer lending, payments and insurance distribution. The company has been running a thriving micro lending business that packages thousands of small consumer loans and sells them to institutional investors in the form of asset-backed securities.
The South China Morning Post reported in April that Ant Financial was in talks with Singaporean state investment firm Temasek Holdings for a $10 billion round of funding that will give the company an incredible valuation of $150 billion, effectively dwarfing Uber’s $60 billion valuation.
#3 Xiaomi
Chinese smartphone manufacturer Xiaomi is one of the world’s largest smartphone makers.
After going through some struggles in 2016 and the early part of 2017, Xiaomi finally made an epic comeback by topping its annual revenue goal of $15 billion with a net profit of $1 billion thanks to a flagship model launch and diversifying its distribution channels. The company’s profit is expected to double in the current year to hit $2 billion.
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So this looks like a good time for the company to go public, with an IPO expected to value it at a hefty $100 billion.
#4 Tencent Music
Tencent Music, one of Tencent Holdings’ affiliates, is a music streaming and downloading service. The company was created through a merger between former rivals QQ Music and China Music Corporation in 2017.
The new entity is truly the Spotify of China, controlling 75 percent of the Chinese market. Bloomberg has estimated the company’s IPO will target $1 billion and value the company at a whopping $10 billion.
#5 iQiyi
YouTube-style video streaming service iQiyi is owned by China’s giant e-commerce platform, Baidu. In a battle against Tencent’s Tencent Video and Alibaba-backed Youku, iQiyi has been investing heavily in high-quality content both self-generated and also through exclusive partnerships.
An IPO for the company is rumored to be slated for 2018 and expected to value it at more than $8 billion. The company has also managed to raise $1.53 billion through the sale of convertible notes to a series of PE firms including Sequoia Capital, Hillhouse Capital, IDG Capital and Everbright-IDG Industrial Fund among others.
By Alex Kimani for Safehaven.com
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