Segway-Ninebot Intends to Go Public on China’s Star Market
COVID-19 and China
A toy IPO for Segway-Ninebot? Image credit: Bernswaelz/Pixabay

Lately unprofitable Segway-Ninebot (九号机器人, A19108:SH) saw the status of its Star board initial public offering application changing to “accepted” once again on August 13.

The self-balancing scooter manufacturer filed for an IPO on the Star Market (download the recent EqualOcean report about the new venue) on April 17, intending to raise over CNY 2 billion (USD 283.93 million) to expand its business scale. One month later, its application got suspended by the bourse. It got back on track earlier this week after the company provided the Shanghai exchange with the required information.

"This listing will give Segway-Ninebot much greater consumer visibility. Besides, the firm is likely to go public again -- on Nasdaq."

Thomas Yao, Partner at IMO.VC

Founded in 2014, Ninebot is a Beijing-based micromobility tool producer registered in the Cayman Islands. In April 2015 the company acquired its American nemesis Segway, while raising USD 80 million from a handful of world-renowned investors including its client Xiaomi (1810:HK), Sequoia Capital and Shunwei Capital (顺为资本).

This is one of the two overseas-registered companies that have submitted applications to list on the Star board. As mentioned in the company’s prospectus, ICBC (Industrial and Commercial Bank of China, 1398:HK) will buy over 7 million A shares from the firm, selling Chinese Depository Receipts (CDR) at a ratio of 10:1 on the Shanghai bourse.

There is a plethora of famous names among Ninebot’s customers: abovementioned Xiaomi, which has been purchasing over half of the firm’s output since 2016, shared mobility giants such as Bird, Lime, Lyft (LYFT:NASDAQ) and Uber (UBER:NYSE) and global retailers like Walmart (WMT:NYSE), Athena (ATHENA:CPH) and MediaMart.

Despite having an impressive downstream network, it is yet to be profitable. The firm lost CNY 1.80 billion (USD 256 million), CNY 627.28 million (USD 89.04 million) and CNY 157.60 million (USD 22.37 million) in 2018, 2017 and 2016 respectively. At the same time, its operating revenue jumped from CNY 1.15 billion (USD 163.24 million) in 2016 to CNY 4.25 billion (USD 603.29 million) last year, averaging a CAGR of 92.24%.

Concerns abound for this listing. For one, Xiaomi is the company’s major downstream partner that made up 55.75%, 73.76% and 57.31% of Ninebot’s revenue in 2016, 2017 and 2018. The danger of dependency on one client is exacerbated by possible conflicts on intellectual property: the transporter maker’s core technology is vulnerable to theft or imitation. This risk is compounded by the firm's relative tiny R&D expenditure (2.9% of its revenue in 2018).

The micromobility market is recently on the upswing. According to McKinsey, it is projected to be worth between USD 200 billion and USD 300 billion by 2030 in the U.S., USD 100-150 billion in Europe, and USD 30-50 billion in China.

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