China's Niu raises $63m in IPO, closes down on debut

Niu sold 7 million American Depository Shares (ADS) for $9.00 apiece, according to a filing, below the targeted 8.3 million ADS at $10.50-12.50. GGV covered 15.9% of the offering, paying approximately $10 million for 1.11 million ADS. The stock climbed as high as $9.40 on October 19 but ended up closing at $8.65.

Founded in 2015, the company claims to be the market leader among lithium-ion battery-powered e-scooter manufacturers in China, with a 26% share in terms of sales volume. As of June 2018, it had sold more than 431,500 scooters in China, Europe and other countries. It claims to rank third in Europe by sales volume, with an 11.1% market share.

Products are sold through offline and online channels. The offline component includes a network of 205 partners with 571 franchised stores across 150 cities in China and 18 distributors in 23 countries overseas. The company also seeks to position itself as a lifestyle brand for urban mobility in China, operating an app that has more than 457,000 registered users. The app synchronizes with Niu scooters, generating user data for monitoring, diagnostic and product development purposes.

GGV holds an 11.6% stake in the company, while Future Capital has 4.6%. According to AVCJ Research, GGV, Future Capital, IDG, Plum Ventures, and Sequoia Capital China invested $50 million in Niu in 2015.

The prospectus indicates that GGV participated in a preferred share subscription worth $10.4 million in early 2016. The VC firm re-upped in a Series B round of $25.5 million earlier this year, joined by Plum, Future Capital, and IDG, among others. Concurrent to the Series B, $16.8 million in convertible loans issued to certain existing shareholders in 2016 were converted to equity.

Niu has also received venture debt funding from the likes of East West Bank, Bank of China, and Silicon Valley Bank. Short-term borrowings stood at RMB168.2 million in December 2017.

The largest external shareholder in the company is a trust of which Yinan Li, Niu’s founder, is the beneficiary. A former Huawei executive, Li was convicted of insider trading by a Chinese court in January 2017 and released from prison last December. Li no longer has an official position with Niu and the company claims he has no operational involvement.

Three members of Niu’s management team, including CEO Yan Li, will hold 13.7% of the equity post-offering but the dual-class share structure gives them a disproportionately large voting power – though not a controlling interest.

Most of the company’s revenue comes from scooter sales, with vehicle maintenance services and spare part sales accounting for the rest. Revenue reached RMB769.4 million ($116.2 million) in 2017, up from RMB354.8 million a year earlier. Over the same period, the net loss narrowed from RMB232.7 million to RMB184.7 million. For the first six months of 2018, Niu posted revenue of RMB557.1 million and a net loss of RMB314.9 million.

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• Topics
• Greater China
• Technology
• IPO
• China
• GGV Capital
• IDG Capital Partners
• Transportation
• TMT