VC-backed WoWo jumps 2.85% on debut after $40m US IPO

The offering, which was delayed several times, saw WoWo sell four million American Depository Shares (ADS) at $10.00 apiece, according to a regulatory filing. The size and pricing of the offering was scaled back from an initial plan to raise up to $66 million. The stock opened at $11.05 but then fell back before closing at $10.285.

If underwriters exercise the full overallotment option, the offering could end up at $46 million.

It marks a liquidity event for CDH Investments and Tianyou Investment, neither of which sold any shares in the offering. They have now been diluted to 11.55% and 6.80%, respectively. Zero2IPO Capital has previously invested in the company although it is not listed among the principal shareholders.

Set up in 2010 by Maodong Xu, who still controls the business, WoWo claims to have found its initial group-buying strategy too limiting: The approach helped merchants increase sales by clearing extra capacity but did little in terms of promoting brand awareness and customer loyalty. It is also worth noting that, from 2010, the group-buying space in China was flooded with new entrants.

In 2012, the company introduced WoWo Mall - a platform along the lines of Alibaba Group's Tmall that allows merchants to establish their own online stores - to complement the promotions side of the business created under 55tuan. The client base is largely unchanged, comprising restaurants, movie theaters and beauty salons.

Although fees paid by merchants to set up stores on WoWo Mall increased threefold between 2012 and 2013, the company still relies on discount offers - customers use WoWo Coupons to make discounted purchases through the platform - for three quarters of its revenue.

According to consultancy iResearch, as of June 2014 WoWo was the largest e-commerce platform for local lifestyle services in terms of number of merchants and registered users. The company works with over 100,000 merchants, with 150 service centers and 2,000 representatives nationwide. It also operates the WoWo Mobile app, which had been installed on 17.3 million devices as of September 2014.

Revenue came to $36.3 million in 2013, up from $27.8 million the previous year, while the net loss narrowed from $39 million to $32.2 million. For the first nine months of 2014, the company generated revenue of $20.6 million and a net loss of $36.1 million.

Zero2IPO invested $5 million in April 2011, and over the following three months, CDH, Zero2IPO and Besto Holdings committed $50 million, with CDH and Zero2IPO putting in $30 million and $2 million, respectively.

In 2012, the existing investors were joined by several others, including Tianyou, in a Series B round worth $12.5 million, while the Series A participants received additional equity as part of an anti-dilution adjustment. Last May, CDH, Zero2IPO and others invested a further $50 million.

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• Topics
• Consumer
• Technology
• Greater China
• Exits
• CDH Investments Management
• Exit
• IPO
• China
• TMT
• Consumer