China’s first US-listed SaaS company forced to delist
The New York Stock Exchange (NYSE) has suspended trading of China’s Cloopen and will apply to delist the software-as-a-service (SaaS) provider due to a failure to file its annual reports.
Cloopen, known as the first Chinese SaaS company to be listed in the US, has not filed its annual reports for 2021 and 2022 and has informed the NYSE that it will not be able to complete its delayed filing by May 17. This exceeds the maximum time allowed by the stock exchange, according to a filing.
The company received initial funding in 2013 from Sequoia Capital China. Trustbridge Partners led a round in 2015. Both two investors re-upped in 2016. China V Fund Management, Prospect Avenue Capital and Vitalbridge Capital invested in 2019, while China Reform Holdings and Mirae Asset Venture Investment joined a USD 125m pre-IPO round in 2020, according to AVCJ Research.
Cloopen went public in February 2021, selling 20m American Depository Shares at USD 16 apiece to raise USD 320m. The stock climbed 200% on its debut trading day. At the time, Sequoia and Trustbridge were the two largest external shareholders with 16.8% and 12% share respectively.
The company offers customers a range of real-time voice and messaging systems, including tools for multi-channel customer interaction and intra-organization communication.
Revenue improved 30% during 2019 to CNY 650.3m and came to CNY 509m during the first nine months of 2020. The net loss widened from CNY 155.5m in 2018 to CNY 183.5m in 2019 and was CNY 203.7m as of September 2020.
Cloopen is also known for its involvement in various incidents of fraud. Chinese broadcaster CCTV reported that a subsidiary of the company was responsible for illegal acquisition of personal data and for helping clients evade regulatory surveillance by making marketing phone calls with different phone numbers. KPMG resigned as the company’s accounting firm and reported that certain employees had posted fraudulent revenue figures.
These troubles were compounded by a generally challenging environment for SaaS companies in terms of customer retention and the high cost to generating revenue.
Cloopen, which pays service fees for telecommunications resources, saw its customer retention rate decrease from 135% in 2018 to 94% in the first nine months of 2020. Costs paid for telecommunications resources represented above 45% of total revenue for 2018 and 2019, according to its prospectus.
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