Chinese Regulator Greenlights UCloud's Star Market IPO
The cloud storage provider received a nod from the market authority on December 24. It is expected to start trading in a few weeks.
UCloud, a Shanghai-based late-stage startup backed by a diverse litany of investors such as transnational media corporation Bertelsmann, investment bank CICC and venture fund Legend Capital (君联资本), has reached the final phase of its IPO process: the country's market regulator China Securities Regulatory Commission (CSRC) said yes after more than two months of extra scrutiny. This is the first company in the new tech venue that will trade shares with Weighted Voting Rights (WVR).
Read more about the listing standards for stocks with WVR structure on the fresh Shanghai marketplace in the recent EqualOcean report (download).
This September, EqualOcean reported that the company passed the sci-tech board Listing Committee's review. At the time, the watchdog asked UCloud to disclose additional information regarding the market share change over the past several years as well as make public its short-term development plans. Besides, some concerns about cost optimization and market positioning were raised: the small-sized cloud service provider, indeed, should carefully tailor its strategy to maintain buoyancy on the highly competitive scene filled with digital giants such as Alibaba (BABA:NYSE) and Tencent (0700:HK).
Talking shop, UCloud's de facto core business is public cloud services – around 90% of the firm's revenue over the past three years has come from this field. Meanwhile, the earnings from the hybrid-cloud solution sales have been growing at a 148.72% CAGR since 2016, hitting CNY 138.82 million (USD 19.85 million) last year. As a result of this astonishing growth, the segment's proportion in the income pool grew from 4.34% in 2016 to 11.69% in 2018.
The operating income itself has also ballooned significantly: the most updated prospectus (in Chinese) states that the IaaS provider gained CNY 698.5 million (USD 99.87 million) in the first half of this year – 35% more than that of the entire 2016. Staggering speed. But is this enough to keep up with the fast-paced industry environment?
According to International Data Corporation (IDC), the Chinese public cloud market is expected to climb to USD 27.5 billion by 2022, which means that over USD 20 billion of value will be generated in this domain locally. As for the global scale, Gartner's estimation is jaw-dropping: USD 354.6 billion, with the rapidly growing 'Infrastructure as a Service' (IaaS) submarket (check out our latest report on the most disruptive enterprise service startups and the industry trends).
Besides world dominators like AWS, the cloud space is now facing a young bunch of challengers, such as British seed-stage Software-as-a-Service (SaaS) startup Cyclr, California-based end-to-end cloud commerce platform AppDirect and cloud access security broker Bitglass that helps enterprises move to SaaS-based deployment.