PE-backed Zhaogang files Hong Kong IPO

The draft prospectus does not disclose the size or pricing of the offering, but the company reportedly said earlier this year that it was seeking to raise about $500 million. The largest institutional shareholders are currently K2 Ventures with a 10.5% stake, Matrix Partners China with 9.7%, and ZhenFund with 5.7%.

As part of the float, Zhaogang will adopt a weighted voting rights (WVR) structure that allows founders to retain control of their companies even after their equity interest has fallen below 50%. The Hong Kong Stock Exchange began to accept WVR arrangements for innovative companies of significant size earlier this year. Other companies taking advantage of the new rules include Meituan-Dianping and Xiaomi.

Founded in 2012, Zhaogang facilitates steel trading online between suppliers and buyers, as well as providing storage, material processing, and logistics services. The company has also expanded into lending, offering loans to small and medium-sized steel companies. It has been said to account for more than 40% of the online market for trading in steel products.

Zhaogang received an RMB500 million round last year from China Renaissance-owned Huaxing Growth Capital, the Russia-China Investment Fund, and West Fund, an investment vehicle launched by Chinese state-backed steelmaker Shougang Group and domestic broker Zhongtai Securities.

This followed a RMB1.1 billion investment in 2016 led by West Fund. Around the same time, Zhaogang removed its variable interest entity (VIE) structure - which allows offshore investors to take equity stakes in Chinese companies that operate in sectors in which foreign participation is restricted - in what was thought to be preparation for an onshore listing.

Other backers include Yunqi Partners, Bull Capital Partners, IDG Capital Partners, Sequoia Capital China, Huatai Securities, Sanren Capital, Oriental Fortune Capital, Qianhe Capital, Xinmen Investment, Minheng Wealth Management, and Fulin Yuyong Capital.

Revenue for 2017 came to RMB17.5 billion, compared to RMB9 billion the prior year, with Zhaogang citing factors including improvements in operating efficiency and growing internet penetration for e-commerce and ancillary services providers. The company recorded a loss of RMB124 million in 2017, versus a loss of RMB822 million the prior year.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Technology
• Industrials
• China
• Hong Kong (China)
• IPO
• Commodities
• e-commerce