As the IPO of Chinese concept stocks continues to be sluggish, the largest market value project for domestic companies listed on the New York Stock Exchange has quietly emerged.
On the evening of December 15th Beijing time, the domestic MRO procurement service platform Zhenkunxing was officially listed on the New York Stock Exchange, with the stock code "ZKH", becoming the first Chinese MRO to go to the United States and the largest Chinese concept stock in the past two and a half years.
It is reported that Zhenkunxing will issue 4 million American Depositary Shares (ADS) in this IPO at a price of 15.5 yuan per ADS, raising $62 million. The underwriters will have an additional 600000 ADS overallocation rights. Deutsche Bank, Huaxing Capital, and CICC are the joint underwriters for this event. At the same time, both Tencent and Canada Pension Plan Investment Board, existing shareholders of Zhenkunxing, participated in the subscription and issuance, with Canada Pension Fund subscribing to ADSs worth $10 million and Tencent subscribing to ADSs worth $5 million.
"Based on the issuance price, the market value of Zhenkunxing is approximately 2.5 billion US dollars, equivalent to 17.8 billion yuan, making it the largest listed Chinese concept stock in more than two years. It is expected that the IPO of Chinese concept stocks will rebound in the future, and the subscription of Zhenkunxing by many international giants should be seen as capital's optimistic view of the long-term value of enterprises in China's digital economy track and recognition of the MRO competition track.", Liang Bin (pseudonym), a senior analyst in the Chinese concept stock market at a leading domestic securities firm, told the Huaxia Times reporter.
MRO Market Pioneers
Since July 2021, domestic companies have shown a sluggish trend in going public in the United States. In 2022, only 27 domestic companies went public in the United States, of which 13 were listed through IPO, and 14 were listed through SPAC, shell lending, and board transfer; As of the end of October 2023, 34 Chinese concept stocks were listed on the US stock market, of which 25 were listed through IPOs and 9 were listed through SPACs. Currently, there are more than 70 domestic companies waiting in line to go public in the United States.
The listing of Zhenkunxing on the New York Stock Exchange has set a record for the largest market value of Chinese concept stocks in two and a half years.
"We are here to attend the listing ceremony, not just to celebrate, but to make a solemn commitment: to become a public company, we will take on more social responsibility, be more transparent and compliant, and govern the company with higher standards. Whether it is to provide better returns to shareholders, or to achieve employees and partners, we need to adhere to customer-centric principles, continuously cultivate the supply chain, and create greater value for our customers." Chen Long, Chairman and CEO of Zhenkunxing, stated at the IPO site.
According to public offering materials, Zhenkunxing Industrial Supermarket, headquartered in Shanghai in 2014, mainly provides customers with one-stop industrial goods (MRO) procurement and management services, as well as digital and performance solutions for upstream and downstream enterprises in the industry. Through the digital supply chain construction of the MRO industry, we serve the domestic manufacturing industry and the real economy, thereby helping customers reduce costs, improve efficiency, and achieve digital transformation of the supply chain.
The so-called MRO (Maintenance, Repair, Operation) refers to non productive materials that do not directly constitute products in the production process of an enterprise, but are only used for maintenance, repair, and operation purposes. MRO procurement is directly related to the daily operations of manufacturing enterprises. This industry originated in the United States, and early established companies such as Gu'anjie and Fasinor are representative of MRO.
On the first day of listing, Zhenkunxing rose as high as $18 per share, and closed at $15.5 on the same day as the issue price, showing decent performance.
"Compared to the normal A-share IPO breakout, the first day stock price performance of Zhenkunxing was relatively good, after all, overseas investors' enthusiasm for Chinese concept stocks has not fully recovered, and from the list of underwriters and subscription investors, it also shows the recognition of shareholders and investors for the MRO business model." Liang Bin said frankly about the stock price performance.
However, in the eyes of industry insiders, there is a huge "gold mine" for MRO in the global digital economy wave.
The CIC report shows that China is the country with the largest industrial output value in the world, with the market size of MRO procurement services reaching 3004.1 billion yuan in 2022. The compound growth rate from 2022 to 2027 is 5.8%, and it is expected to reach 3976.6 billion yuan in 2027. With the rapid development of technologies such as the Internet, SaaS, intelligent logistics, and IT infrastructure, MRO procurement is also gradually becoming digitized, with huge potential. The market size of online MRO procurement services in China is expected to reach 3976.6 billion yuan from 2022 to 2027 The compound growth rate is 29.2% and is expected to reach RMB 847 billion in 2027. The relatively low online penetration rate and market concentration between online platforms in China have brought huge market opportunities for leading MRO procurement service platforms, which means that Zhenkunxing, as an early entrant, has a significant first mover advantage On December 18th, senior domestic MRO expert Chang Ruihua stated in an interview with a reporter from Huaxia Times.
Multiple institutions "accompany" to bet on the digital economy track
It is worth noting that during the listing process of Zhenkunxing in the United States, strong investment institutions have emerged one after another. In addition to Tencent, Canada Pension and other institutions that have locked up funds in the IPO in advance, on December 16th, Zhongding Capital also announced in an official announcement that Zhongding Capital's investment enterprise Zhenkunxing has successfully listed on the New York Stock Exchange in the United States, and the company has successfully obtained a heavyweight IPO project in the field of supply chain innovation. Since its lead investment in the B-round financing of Zhenkunxing in 2017, Zhongding Capital has continuously raised funds in the B+round, C round, D round, and E round. It is the largest institutional shareholder of Zhenkunxing before its listing, and also the earliest and longest institutional shareholder invested by Zhenkunxing.
"The long-term continuous investment of Zhenkunxing reflects the company's firm confidence in investing in China's supply chain innovation," Zhong Ding Capital pointed out.
According to public information, before its IPO, Zhenkunxing had also gained the favor of several well-known investment institutions and had a strong shareholder lineup. Including Zhongding Capital, Yuansheng Capital, Tencent, Tiger Fund, Canadian Pension Fund (CPPIB), Jingwei Venture Capital, Junlian Capital, Yunfeng Fund, China State owned Enterprise Restructuring Fund, CIC, Fidelity Fund (FMR), Shell, etc.
As for the purpose of this fundraising, the prospectus shows that about 30% of the net proceeds from the IPO of Zhenkunxing will be used to further expand its business, especially to continue developing the selected product line of experts; About 30% is used to strengthen supply chain capabilities and further improve performance efficiency; Approximately 30% for potential strategic investments and acquisitions; The remaining portion is used for general corporate purposes, including working capital needs, investment in research and development to continue building infrastructure and improving digital services, as well as expanding overseas markets.
"At the beginning of next year, Zhenkunxing's independent website in the United States will be launched, and it will truly begin its international journey, serving more global customers with more industrial goods manufacturing partners," a person close to Zhenkunxing told our reporter on December 18th.
Liang Bin stated that in recent years, as the company with the largest market value of Chinese concept stocks, its future commercial performance will definitely receive attention. From the perspective of regulatory policies, since March this year, the China Securities Regulatory Commission has officially implemented the filing system for overseas listing of enterprises, providing smoother channels and conditions for domestic enterprises to go public overseas. The filing system has entered a normalized stage, and companies going overseas for IPOs are showing a preliminary recovery trend.
Since the beginning of this year, the successful listing of multiple Chinese concept stock companies on the US stock market is releasing a positive signal. The recovery of financing channels in the US stock market allows Chinese companies to obtain more international capital support and broader international market opportunities. With the completion of a series of unblockings in financial supervision, data security, and other fields in China's two major capital markets, it is expected that by 2024, the Chinese concept stock market will become more stable, and domestic companies listing in the US will present a trend Develop a positive and positive development trend Liang Bin pointed out to our reporter.