China's Miss Fresh raises $273m in US IPO, drops on debut

A total of 21 million American Depository Shares (ADS) were sold at $13.00 apiece, according to a filing, representing the bottom end of the indicative range. Several existing investors – China International Capital Corporation (CICC), Tencent Holdings, Davis Selected Advisors, Genesis Capital, and Vision Plus Capital – committed a combined $90 million to the IPO.

The stock opened at $10.65 on June 26 and fell as low as $8.21 before closing at $9.66. It fell a further 9.32% on June 28, closing at $8.76. The company has a market capitalization of approximately $2 billion.

Much like its direct rival Dingdong Macai – which filed for an IPO on the same day but has yet to start trading – Miss Fresh has benefited from the surge in growth-stage funding in China. It secured $800 million in the second half of 2020, comprising $495 million in July and RMB2 billion ($305 million) in December. The investments were led by CICC Capital and a string of government-related funds, respectively.

Tiger Global Management is the largest external shareholder with 11.1%, having participated in a $330 million Series C in 2017 and re-upped in subsequent rounds.

GX Capital was the earliest investor, providing $5 million in angel funding in 2014 and participating in a Series A of undisclosed size alongside Tencent. The technology giant, which owns 7.9%, led both tranches of the RMB430 million Series B, which came in 2015 and 2016. It also co-led a $450 million round in 2018 with Goldman Sachs, Jeneration Capital, and Davis Selected.

Genesis, which has taken part in several rounds, holds 6.6%. Zheng Xu, founder, chairman and CEO of Miss Fresh, owns 12.2% but has a majority of the voting power due to the dual-class share structure.

China's overall fresh produce market has experienced explosive growth in the past year as COVID-19 prompted lockdowns and social distancing. Various community group-buying platforms are now active in the space as well as all the country's major internet companies Alibaba Group, Meituan, JD.com, and Pinduoduo.

Miss Fresh pursues a front-warehouse model, operating small warehouses in city centers instead of large suburban facilities. This speeds up fulfillment. It uses digital management systems and algorithm-based sales forecasting in warehouse location selection, product selection, and procurement, claiming this minimizes the slow-moving inventory loss rate.

There is also an emphasis on sourcing directly from farmers. On one hand, this is a means of quality control and ensuring timely delivery. On the other, it brings standardization and efficiency to a highly fragmented upstream agricultural supply chain, removing redundant intermediaries.

Miss Fresh claims to have invented the “distributed mini-warehouse” (DMW) model in China and operated 631 of these facilities across 16 cities as of March. It had 7.9 million transacting users in 2020 and average delivery time was 39 minutes in the first three months of 2021. It also sells software to offline retailers and has signed contracts to operate 54 fresh markets in 14 cities.

Gross merchandise value was RMB7.6 billion in 2020, representing a slight increase on 2019. Revenue rose from RMB6 billion in 2019 to RMB6.1 billion in 2020, while the net loss narrowed from RMB2.9 billion to RMB1.6 billion.

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• Topics
• Greater China
• Technology
• Consumer
• IPO
• China
• TMT
• Tiger Global Management
• Tencent
• CICC
• Vision Plus Capital
• Jeneration Capital
• Goldman Sachs