China e-commerce player WoWo files for US IPO

The company has yet to indicate how many shares it plans to sell or at what price. The offering will provide a liquidity event for CDH Investments, which holds a 17.19% stake in the business via its venture capital unit, as well as for groups including Zero2IPO Capital and Tianyou Investment.

Set up in 2010 by Maodong Xu, still the chairman, CEO and single largest shareholder, WoWo claims to have found its initial group-buying strategy too limiting: The approach helped merchants increase sales by clearing extra capacity but did little in terms of promoting brand awareness and customer loyalty.

It is also worth noting that, from 2010 onwards, the group-buying space in China was flooded with new entrants, creating massive oversupply and eroding margins. Many operators went out of business.

In 2012, the company introduced WoWo Mall - a platform along the lines of Alibaba Group's Tmall that allows merchants to establish their own online stores - to complement the promotions side of the business created under 55tuan. The client base is largely unchanged, comprising restaurants, movie theaters and beauty salons.

According to consultancy iResearch, as of June 2014 WoWo was the largest e-commerce platform for local lifestyle services in terms of number of merchants and registered users. The company works with over 100,000 merchants, with 150 service centers and 2,000 representatives nationwide.

It also operates the WoWo Mobile app, which had been installed on 17.3 million devices as of September, and WoWo EMS, which provides back office and customer relationship management services to merchants.

The company generates most of its revenue from commissions generated by WoWo Coupons - customers use them to make discounted purchases through the platform - and from merchants that pay to set up stores on WoWo Mall. Revenues came to $36.3 million in 2013, up from $27.8 million the previous year, while the net loss narrowed from $39 million to $32.2 million.

Zero2IPO invested $5 million in the company through convertible redeemable preference shares in April 2011. Over the following three months, CDH, Zer2IPO and Besto Holdings committed $50 million, with CDH and Zero2IPO putting in $30 million and $2 million, respectively.

In 2012, the existing investors were joined by several others, including Tianyou, in a Series B round worth $12.5 million, while the Series A participants received additional equity as part of an anti-dilution adjustment. Last May, CDH, Zero2IPO and others invested a further $50 million.

Tianyou owns 9.94% of WoWo. A investment firm of the same name, said to be owned by a high net worth individual, acquired Nanjing Aotecar, a Chinese manufacturer of compressors used in car air-conditioning systems, from CITIC Capital and CDH in 2013.

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• Topics
• Exits
• Greater China
• Technology
• Consumer
• TMT
• Consumer
• China
• IPO
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• CDH Investments Management