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When Chinese Internet companies look for an initial public offering, they tend to turn to the United States, where the rules of profitability are less stringent. SMZDM, an online buying guide that few outside China have heard of, has joined a small number of Internet startups that are trading in mainland China's public markets.
SMZDM, abbreviated as Shen Me Zhi De Mai or "worth buying" in Chinese, saw its shares climb nearly 44% on its first trading day in Shenzhen. After setting its IPO at 28.42 yuan ($ 4.13) and opening the day at 34.1 yuan, the SMZDM closed at 40.92 yuan. That was worth to the company about 2.18 billion yuan (320 million dollars).
The company raises 330 million yuan through the public offering and plans to spend this money to upgrade its Big Data capabilities to provide more personalized content and services to users.
Before applying for listing on the A-list of major Chinese stock exchanges, companies generally need a three-year profitability history, although the country has made progress in smoothing the way for high-tech, high-potential companies. deficit. SMZDM reported net income (in Chinese) of 19.35 million yuan (2.81 million US dollars), 35.16 million yuan and 86.24 million yuan in 2015, 2016 and 2017. Its revenues have pbaded from 97.29 million in 2015 to 367 million yuan in 2017.
Since its creation nine years ago, SMZDM has been mobilized by only one institutional investor, China Growth Capital. Why sell shares to the public while the company was already making a lot of money?
"For an internet start-up to continue to attract talent, it needs to have a transparent business structure and an employee ownership plan," Wu Haiyan, managing partner of China Growth Capital, told TechCrunch. "Of course, advertising is another way of raising capital."
SMZDM started life as the blog of the founder of Sui Guodong, where he reviewed a range of gadgets as hobbies. Over time, the WordPress site has evolved into a public platform where Internet users share guides to purchase products of all kinds – from formula to Nikon's latest lens – and where to find the best price. When a transaction is made on its partner markets, SMZDM receives a commission.
This model means that buying guides like SMZDM rely heavily on shopping portals to succeed and are sensitive to the changes that are occurring at the e-commerce giants. Indeed, over 85% of SMZDM's commission and marketing revenues in 2018 came from Alibaba, JD.com, Amazon and its other main customers.
At the moment, at least, Alibaba and others seem to be showing enough interest in third-party product evaluation sites. According to Wu, "the heart of e-commerce portals is to generate sales instead of creating a community for giving and receiving impartial feedback," which is SMZDM's value proposition. She added that the key performance of an online community is the level of user interaction and the amount of content that they generate.
That's why Alibaba and Tencent – who have supported the e-commerce companies JD.com, Pinduoduo and Mogu – have thrown money at Xiaohongshu ("The Little Red Book" in Chinese), a social media platform for learn lifestyle trends.
While Xiaohongshu's buyers are mostly women, as is the case for most Chinese e-commerce services, more than half of SMZDM users are men, a result largely attributable to its abundant content on the market. hardware and appliances.
According to Wu, this library of product reviews is what sets SMZDM apart from its competitors.
"Building a community takes time and capital alone can not help it grow," said the investor. "People are looking for high quality content and interacting with like-minded users. When a community starts to have its own atmosphere, people will stay. "
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