China's Cootek struggles on trading debut, vows to push forward

“AI [artificial intelligence] and big data are the cornerstones on which we build our core products. While we will still focus on expanding the user base for TouchPal, we want to find ways to monetize our other apps as well,” Susan Li, the company’s president and co-founder, told AVCJ. “We might add apps that focus on content and information services in the future.”

CooTek, which is also known as Chubao, sold 4.35 million American Depository Shares (ADS) in its IPO at $12 apiece – the low end of the indicative range – to raise $52.2 million, according to a filing. The size of the offering may rise if underwriters exercise the overallotment option. The company endured a difficult first day of trading as its stock closed at $9.44 on September 28, a 27% deficit to the IPO price. It rallied somewhat on October 1, gaining 1.7% to close at $9.60.

“As the company has already turned profitable, what we now want to achieve through this listing is increase our brand awareness and attract more talent to join us,” Li added.

Brand awareness overseas is a key issue for CooTek. The company, unlike many of its domestic peers, has relied heavily on an international customer base since its inception in 2008. Thanks to TouchPal – which supports multilingual next-word prediction and mistyping correction and auto spelling correction – it now covers more than 240 countries with 133 million daily active users (DAUs). Last year, the app was preinstalled on devices shipped by more than 50 manufacturers, including Oppo, Vivo, and HTC.

CooTek is keen to tap the huge monetization potential of the data generated by TouchPal. The company has already launched more than a dozen apps with functions ranging from fitness tracking to period monitoring to sending reminders to order more drinking water. These apps had an average 7.3 million DAUs in June. An AI-powered virtual personal assistant has also been launched that understands everyday conversations and delivers relevant content. It integrates with TouchPal and other apps.   

Cootek currently generates most of its revenue from online advertising on the TouchPal app. Revenue reached $37.3 million in 2017, up 238.5% year-on-year, while the company’s net loss narrowed from $30.7 million to $23.7 million. It posted a net income of $3.5 million for the first six months of 2018 thanks to a growing user base.

Following the offering, Qiming Venture Partners held a 16.9% stake in Cootek, while Sequoia Capital China and SIG Asia owned 17.4%, and 13.3%, respectively. Sequoia was not diluted as much as other others because it acquired additional shares in the offering. Karl Zhang, the company’s co-founder and chairman, retains majority voting power due to the dual-class share structure.

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• Topics
• Greater China
• IPO
• Technology
• China
• Qiming Venture Partners
• Sequoia Capital
• TMT
• Susquehanna Asia Investment