Chinese online marketplace 58.com sets terms for $165m US IPO

According to a regulatory filing, 58.com will sell 11 million American Depository Shares (ADS) at $13-15 apiece. On completion of the offering, DCM has agreed to buy $15 million in Class A ordinary shares at a price equal to the IPO price adjusted to reflect the ADS-to-ordinary share ratio. Each ADS represents two ordinary shares.

Founded in 2005, 58.com is modeled after US site Craigslist, providing classified ads for flat rental, recruitment, second hand goods and cars. Its services cover approximately 380 cities in China.

Citing a report by tech consultancy iResearch, 58.com was the industry leader with a 38.1% share in terms of cash receipts in China's online classifieds market in 2012. As of the second quarter of 2013, it had around 4.3 million active local merchants, an average of 129.7 million monthly unique visitors, and an average of 1.9 million listings per day on its website and mobile applications.

The company generates revenues primarily from memberships and online marketing services. A membership package comprises merchant certification, an online storefront display, preferential listing benefits and access to a customer service support team and online account management system.

58.com posted revenues of $10.7 million in 2010, $41.5 million in 2011 and $87.1 million in 2012. However, it recorded net losses in each of these years and only turned profitable in the first six months of 2013, with a net income of $300,000.

AVCJ Research shows SAIF initially invested $1 million in 58.com in 2006 and returned to put in an additional $5.77 million two years later. SAIF then re-upped in March 2010 with a $15 million round alongside DCM. DCM returned later that year to invest another $45 million together with Warburg Pincus.

Warburg Pincus, SAIF and DCM currently hold stakes of 25.8%, 20.5% and 16.6%, respectively. Their holdings will be diluted slightly following the offering.

China' s online marketing industry is expected to grow from $12.1 billion in 2012 to $39.3 billion in 2017, representing five-year compound annual growth of 26.6%, according to iResearch. The online classifieds market was worth $275.4 million in 2012 and is projected to reach $2.4 billion by 2017. Over the same period, online classifieds as a percentage of total classifieds is expected to rise from 10.6% to 43.9%.

The principal driving factors are the growing adoption of mobile internet usage, the availability of richer and more complex applications on mobile devices, and the proliferation of small and medium-sized enterprises that see online classifieds as a cost-effective means of reaching potential customers.

Last month, Montage Technology Group, a China-based semiconductor manufacturer backed by AsiaVest Partners and Intel Capital, raised $71 million through a NASDAQ IPO, becoming only the second Chinese company to go public on a US bourse this year. The first was Beijing-based online retailer LightInTheBox - backed by Ceyuan Ventures, GSR Venture and Trustbridge Ventures - which raised $79 million in June.

Morgan Stanley, Credit Suisse and Citi are joint bookrunners for the 58.com offering.

 

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• Topics
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• Greater China
• Venture
• Venture
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• TMT
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• SAIF Partners
• Warburg Pincus Asia
• DCM-Doll Capital Management