The initial public offering of recently-listed Chinese education provider Youdao on the New York Stock Exchange opened at 13.4% below the listing price.
Person using macbook. Image Credit: Jason Briscoe/Unsplash
The Beijing-based Youdao (有道) launched on the New York Stock Exchange under the symbol ‘DAO’ on Friday, October 25. The company set its offering of 5.6 million American depositary shares at USD 17 per share in an attempt to raise USD 300 million.
However, the shares opened at USD 13.50, reaching their highest price at USD 14.72; by the end of the day the trade closed at USD 12.5, which was 32.1% down from the IPO price.
The company has raised USD 95.2 billion through the offering process, and plans to raise a further USD125 million through private placement of 7.35 million ordinary shares to certain funds managed by Orbis Investment Management Ltd.
Youdao, a search engine and online education platform, was launched by Zhejiang-based gaming company NetEase (网易) back in 2006. It operates China’s most popular dictionary and translation app and counted more than 700 million users at the start of the year.
The firm accumulated a revenue of CNY 548.54 million in the first half of 2019, with a year-on-year increase of 67.7%. The net losses, on the other hand, were as high as CNY 167.89 million compared to CNY 82.75 million in the first half of 2018.
Furthermore, throughout the first half of 2019, the company had 338,000 paid users using its higher education courses, 105,000 of which were users subscribed to its K12 courses, marking 80.8% year-on-year increase, according to the prospectus.
NetEase (NTES: NASDAQ) is listed on NASDAQ and is one of China’s largest internet companies, with a revenue of CNY 67.16 billion last year. The company claims to have more than 800 million users, with a DAU of 17 million across its portfolio of apps, with Youdao accounting for a significant share.
It’s still early to judge Youdao’s IPO performance from its first day – China’s online education is in higher demand every year. In the end, what matters is the long-term, post IPO performance.