China's Manbang trades up after $1.57b US offering
Manbang, a China trucking business that claims to be the world’s largest digital freight platform, gained 13% on debut following a $1.57 billion IPO in the US.
The company – also known as Full Truck Alliance – sold 82.5 million American Depository Shares (ADS) at $19.00 apiece, representing the top end of the indicative range, according to a filing. Meanwhile, Ontario Teachers’ Pension Plan (OTPP) and Mubadala Investment agreed to purchase $100 million worth of shares at the IPO price.
The stock opened at $22.50 on June 22 and peaked at $22.80 before falling back to close at $21.50. As of early afternoon trading on June 23, it was around the $20.90 mark, giving the company a market capitalization of approximately $22.7 billion. Manbang achieved a valuation of $12 billion in its most recent private funding round six months ago.
SoftBank Vision Fund is the largest shareholder with 20.3%, although its voting power is a fraction of that because of the dual-class share structure. The first Vision Fund led a $1.9 billion round at a valuation of $6 billion in 2018, while its successor led the most recent investment, which totaled $1.7 billion. Sequoia Capital China, on 6.6%, is the only other investor above the 5% disclosure threshold.
Manbang is the product of a 2017 merger between two competing platforms, Huochebang and Yunmanman. It connects shippers who want to move cargo with truckers who have excess capacity and can accommodate the appropriate weights, types, and distances.
As of March, more than 1.4 million shippers had posted orders. In 2020, the company facilitated 71.7 million orders with a gross transaction value (GTV) of RMB173.8 billion ($26.6 billion). These orders were fulfilled by more than 2.8 million truckers. China Insights Consultancy (CIC) estimates that approximately 20% of all China’s heavy-duty and medium-duty truckers sourced and fulfilled orders via Manbang last year.
Business took a hit because of COVID-19, with average monthly GTV falling 42.2% year-on-year in January and February 2020. The market rebounded aggressively in March and it remains robust. In the first quarter of 2021, Manbang facilitated 22.1 million orders with GTV of RMB1.5 billion, up 170.2% and 108% year-on-year.
Between 2011 and 2017, Huochebang and Yunmanman evolved from social media-based freight listing services into standalone apps. In 2018, the merged entity targeted monetization through paid membership services. This was followed by the introduction of an end-to-end brokerage service whereby Manbang signed contracts with shippers and truckers and assumed transaction risk. Its platform service fee was the difference between what it collected from shippers and paid to truckers.
Additional monetization channels emerged through online transaction services – whereby truckers pay commissions for access to shipments – and value-added services such as transport management systems, credit solutions, insurance, electronic toll collection, and fuel packages.
Nevertheless, Manbang claims it is at an early stage of monetization. Most of its revenue still comes from membership fees and freight brokerage fees. Revenue reached RMB2.58 billion in 2020, up from RMB2.47 billion the previous year. The net loss widened from RMB1.52 billion to RMB3.47 billion, largely because of rising share-based compensation.
China is the world’s largest road transportation market, worth RMB6.2 trillion in 2020, according to CIC. Full-truckload (FTL) and less-than-truckload (LTL) accounted for RMB5.3 trillion of the total. Their contribution is expected to reach RMB6.5 trillion by 2025.
Manbang is intended to be a standardized solution for a fragmented market. Shippers can spend days finding a trucker through traditional channels, dealing with multiple layers of middlemen, and lacking transparency on pricing. This results in higher costs. Meanwhile, the information asymmetry means truck utilization is limited and truckers spend days searching for their next shipments.
Other investors in the company include Permira, Fidelity, CapitalG, China Reform Fund, Baillie Gifford, Farallon Capital, Hillhouse Capital, GGV Capital, Lightspeed Capital Partners, Yunfeng Capital, Xiang He Capital, All-Stars Investment, CMC Capital Group, and Tencent Holdings.
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