Marketing Strategy for IPO in China

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IPO in China

Full analysis of the situation in China in 2021-2022

Chinese Stock Situation

Due to its unpredictable nature and interference by the Chinese government, the Chinese stock market is one of the most difficult to invest in. Over the past decade, however, things have changed dramatically and Western investors, both institutional and private, are now more open to the potential opportunities China offers. It is not surprising that foreign investors are increasingly looking at China for opportunities. The country has recently published a five-year plan, which highlights huge potential for stocks and green companies.

Despite the outbreaks of Covid-19 that occurred in some southern provinces, China accounted for the majority of VC funding raised by China in the first five month of 2021.

(AF) In spite of Covid-19 epidemics, Chinese startups raised $37.4 Billion in 1,303 venture capital funding deals (VC) from January to May. This is the largest amount among Asia-Pacific countries according to data and analysis company GlobalData.

GlobalData reported Wednesday that February saw the most growth in VC funding value and March the largest growth in deal volume.

50% of Asia Fundraising

Despite its decline, China remained the dominant player in the region’s VC funding landscape. It accounted for nearly 50% of APAC’s total deal volume and 70% if its total deal value – over the review period.

Despite the outbreaks of Covid-19 that occurred in some southern provinces, China accounted for the majority of VC funding raised by China in the first five month of 2021.
(AF) In spite of Covid-19 epidemics, Chinese startups raised $37.4 Billion in 1,303 venture capital funding deals (VC) from January to May. This is the largest amount among Asia-Pacific countries according to data and analysis company GlobalData.

GlobalData reported that 2021 saw the most growth in VC funding value and the largest growth in deal volume.

Despite its decline, China remained the dominant player in the region’s VC funding landscape. It accounted for nearly 50% of APAC’s total deal volume and 70% if its total deal value – over the review period.

Despite investors remaining cautious and deal activity remaining subdued, China was able to see the announcement of big-ticket deals which helped it register a substantial cumulative funding value.

Tencent’s community shopping platform Xingsheng Select (also known by “Xingsheng Youxuan”) was the largest VC financing deal in China, with $3 billion. Alibaba Group backed Xingsheng’s competitor Beijing Shihui Technology raised $750 million.

Chinese VC are confident

VC deals include funding of $700 million for Dingdong Maicai’s grocery shopping app, $664 Million in capital from electric vehicle maker LeapMotor, and $600,000,000 raised by Qingju (the bike-sharing unit at Didi Chuxing’s Chinese ride-hailing company).

KPMG stated that VC investments in China for the second quarter are expected to be heavily focused on embedded technologies such as AI in healthcare and green technologies, given China’s pledge to become carbon-neutral by 2060.

According to KPMG , food technology is expected to attract more investment in China and Hong Kong.

FIVE INTERESTING CHINESE IIPO’S TO WATCH IN 2020
There were many Chinese IPOs in 2020, but more are expected. These are the top tech companies that will IPO in 2021. These include many of China’s most important unicorns like Didi Chuxing (The Uber of China) and ByteDance, (owner of Tiktok). There are also interesting companies in AI (artificial Intelligence).

  1. MEGVII
    Megvii, one of China’s most prominent facial-recognition firms, is looking to list on Shanghai Stock Exchange’s STAR Board. It is also the creator of Face++, the largest open-source computer vision platform in the world. The company has over 2 billion unique facial features. It is also known as China’s four AI dragons, together with SenseTime and Yitu.

“Megvii is a key company that supports China’s efforts to build an AI tech industry in China. It could also play a crucial role in decreasing China’s dependence on American technology. Megvii also serves on China’s national AI team and is therefore likely to reap some of the benefits” explained Jing Associate a Business lawyer.

Important to note is that Megvii was placed on the US entity listing in 2019 due to concerns that it participated in mass surveillance of Muslim minorities within Xinjiang.

  1. DOUYIN
    Bytedance, the company behind Tiktok (also known as Douyin) was started in 2012 by Zhang Yiming, a Chinese internet entrepreneur. Since then, the company has experienced one of the most rapid growth rates in the world. The Hurun Global Unicorn Index 2020 ranked Bytedance as the second-largest unicorn in the world, with a valuation exceeding 80 billion dollars. Its popular video-sharing app was downloaded more than 2 million times worldwide today.
  1. DIDI CHUXING
    Didi Chuxing, the Chinese equivalent of Uber, is planning to go public in 2021. The company is looking for a valuation greater than $62 billion when it launches. Although the official date is not yet known, Didi Chuxing will likely go public sometime around 2021. Didi Chuxing has over 550 million users. This is far more than Uber’s 75,000,000 users. It operates in Asia, Australia, and Latin America. The company offers carpooling, shuttle bus services, designated driving, after-service, delivery, and logistics.

Didi Chuxing was also criticised for not making a profit during its first six year period. However, it saw a change in 2020 when it earned a profit of 1 million USD. Cheng Wei, the CEO of the company, has stated that the Didi Ching will “go all in to take the first position in the market.” “.

  1. SENSETIME
    According Bloomberg, the AI Unicorn SenseTime plans to double-list in Hong Kong and Mainland China this year. Sensetime is also a member of the nationalAI team tasked in the area of smart sight. It is collaborating with 127 Chinese cities to use cameras that can analyze anything, from traffic to residential security. It has also received government contracts to assist in building smart cities across China, like many AI unicorns.

Now, the start-up is resuming its plans for an IPO. These original plans were canceled due to the covid-19 pandemic and the U.S. blacklisting. This has made it more difficult to access American technology which is vital for the company. Bloomberg reports that the IPO plans are still preliminary and could change.

  1. HELLOBIKE
    Hellobike, a Chinese bike-sharing company, filed for an IPO in the United States later this year. It seeks to raise $1 billion USD. However, details are still being debated. Ant Group has backed Hellobike, a mobility platform with a base in Shanghai. The company started out as a bike-sharing service, but it has since expanded to offer e-bikes for its users. It now has over 400 million registered users. The company is a strong candidate to grow in China because Shanghai is in many ways a leading green city.

Chinese companies report their financial statements in a less transparent manner than the rest of the world, making it difficult for investors to conduct due diligence. While this is not necessarily a bad thing it can also be used as a cover for false or inflated financial statements and should be acknowledged. Luckin Coffee is an example. Its stock plunged after it was discovered that it had artificially inflated its sales figures.

CHINESE AUTHORITIES & FINANCIAL SITUATION


The power of the political climate to influence stock markets should not be underestimated by investors. Ant Group’s cancelled IPO is the best example. It was supposed to be the largest IPO in history, but it was stopped by the Chinese government because Jack Ma, founder of Alibaba, gave a speech where he criticized China’s financial institutions. Three months later, Jack Ma disappeared. The financial authorities began investigating a complete overhaul of China’s regulatory environment. This is having major consequences for investors and tech companies.

https://www.reuters.com/technology/exclusive-chinas-ant-explores-ways-jack-ma-exit-beijing-piles-pressure-sources-2021-04-17/

It is clear that understanding the political and market dynamics of China should be a top priority before investing in Chinese companies. The Party’s message is clear: China’s authorities have the final word.

Play low Profil in China in 2022

Global initial public offerings (IPOs) slowed down in the third quarter 2021, though they were still at a frenetic pace in the first nine month of the year, according to Refinitiv data.

The third quarter saw a drop in IPO activity to $94.6 billion from the second quarter. This was due to lower activity and increased scrutiny by the U.S. of Chinese listings after Beijing cracked down on DiDi Global Inc (DIDI.N) just days after the New York IPO.

As private companies rushed for the high valuations of publicly traded peers, more than 2,000 IPOs raised a total $421 billion worldwide year-to-date. This was nearly twice the amount raised in the same time last year.

IPOs in China are booming

This includes the IPOs for 486 special purpose acquisition businesses (SPACs), which raised a total $127.7 million in the first nine months.

The market needed to pause after record-breaking SPAC IPO activity in its first quarter. We are beginning to see early signs that the market will normalize and become more open for the right issuers,” stated David Ludwig, global head equity capital markets at Goldman Sachs Group Inc .

Trading app Robinhood Markets Inc’s $2.1 Billion listing in New York City and South Korean software firm Krafton Inc, which raised more than $3.7B on the Korean stock market were two of the most notable IPOs of the third quarter.

Tencent-backed Chinese online video company Kuaishou Technology Co Ltd’s (1024.HK), $5.4 Billion offering is the largest IPO of this year.

Gary Gensler, Chair of the U.S. Securities and Exchange Commission asked for a “pause in U.S. IPOs” of Chinese companies. He also requested more information about offshore structures and regulatory risks they face in China. As a result, Chinese listings in the United States were stopped. Chinese listings in the United States reached a record $12.8 million within seven months. L1N2PU1GE

Even though valuations were being scrutinised more closely, tech listings remain a popular choice for investors. Stock market debutantes were more diverse than usual. The debut of Taylor Swift’s record label Universal in Europe (UMG.AS) was highly anticipated by the Amsterdam bourse. It is the most valuable company to list in Europe this year.

There are exceptions to the above consumer restriction. If your company isn’t a B2C attractive, obvious fit, there might still be a way for Regulation A+ to work for you.

Let’s look at the key success factors you can build in advance to help to market your IPO

  1. You can attract consumers if you have a loyal following within your industry. However, there are exceptions to the rule. If you have a network, they can be franchisees, distributors, professionals, or whatever. In many cases, your business partners are successful businesspeople who are wealthy enough to invest in the company. This group could fund your entire capital raise if you have enough people to do so. Make sure to establish a contact list. You should also make a habit of regularly emailing them, so that if you send an email suggesting they invest in Reg A+, their email will be read and opened.
  2. A large, enthusiastic customer base is the most important success factor. Once you’ve built a relationship with your customers and they love what you do, you can turn this into a low-cost capital raise. VidAngel sent their 30k most active customers raising $10 million in just 5 days live. This was the fastest online capital raise in Reg. A+.
  3. Your customers should establish a direct sales relationship. Direct sales is a strong IPO success factor. This means that your company sells products to customers regularly and that you have already accumulated customer information. If your customers are used to receiving emails from you, they will be more open to the possibility of becoming part-owners and investors in your company.
  4. Add a product or service that appeals to consumers. If your business model makes sense, it will allow your company to be attractive to investors.
  5. You can build a large fan base on social media. A 100k China fan base is a good starting point. It may seem daunting to you, but it is possible. If you take the necessary steps to grow your social media following, your fan base will grow faster than you would expect and at a much lower cost. The following order of priority: WeChat, Weibo, Douyin, Red . This order may vary depending on your market.
  6. Combining product and investment marketing. Create a vision of how your company can promote its products and raise funds in one marketing campaign in China. Combining product and investment marketing can help you save money and highlight the brand building and product sales synergy possible with IPO offerings. B2C support investment because it gives awareness to the firm.
  7. Awareness is key to success in China. Increase visibility on Baidu. This is the first step towards gaining a reputation
  8. Your existing investors may be able to help you reach new investors. They might also want to invest with your IPO. If you have one, this will resonate with your broker/dealer.
  9. Investor rewards can be prepared: IPO offering allows Chinese investors to receive incentives to encourage them to invest. A luxury club might offer a charter membership that includes a lifetime discount for investors. A Virtual Reality system manufacturer could offer a free upgrade for premium models for investments up to 20,000 Rmb, for example. To ensure you have long-term items in stock and ready to go when Reg A+ goes live, plan your reward packages well in advance.
  10. Baidu is China’s Google. Baidu is used by 75%, making it the undisputed leader of search engines in China. You will need to create a Mandarin version first to establish your brand in China. Chinese investors are skilled technicians who do extensive research online to stay on top of the latest trends.
  11. Hosting your website on a Chinese server using a.cn domain is a key element to making it visible on Baidu. You have two options to help you develop your Baidu strategy. SEO and SEA are two options.SEO is Search Engine Optimization. However, it takes time to get a good rank on Baidu. It also requires a better reputation. SEO strategies will include content sharing, optimization for relevant keywords, and backlinks. Your SEO can be improved by producing quality, diverse content. Ask a Chinese copywriter to help you present your startup and the services and products that you offer. It is important to create content for popular websites, including backlinks to your website. The second option is SEA (Search Engine Advertising), also known as cost per click, click payments or Google AdWords.
  12. Collect the evidence points you’ll need. Gather the market size and market evidence that will support your claims. Create an assumption series to complete the picture. Describe how your solution is better than your competitors and how you will defend against them in future. This information will be necessary to convince brokers and funding platforms that your company is likely long-term to succeed. This information will also be required by your marketing agency as part of their campaign for your offer.
  13. The power of Chinese social media : It is vital for your visibility of your startu p that you are familiar with Chinese social networks. These platforms play a major role in our daily lives, as well as in B2B commerce. It is therefore important to understand the functions of WeChat, and Weibo, two social giants that exist without a country.
  14. Nuturing via WeChat. To position themselves on WeChat, companies, domestic and foreign, have set up official accounts. These accounts are meant to function as a mini-website and allow you to offer customer service to your subscribers.
  15. Weibo has been compared to the Twitter network. Weibo, unlike WeChat which has a closed network and subscribers can only view the content they have subscribed to, is an open network. It is a great way to build your reputation and spread positive word-of mouth by animating its Weibo Page with updates, content, and information.
  16. Building your PR and multiplying apparitions : ePR is a powerful marketing tool to build a company’s image. PRs are designed to increase your company’s reputation and attract the attention of communities that specialize in your industry. PRs will allow you to project a positive image to your target audience, and to manage your reputation.
  17. Good exposure in Chinese media will help you gain visibility and reputation on the Chinese digital sphere. You can position yourself on information sites like Toutiao, QQ, News 168, and News 168 that will help you increase your e-reputation. You will also need to reach out to the specialized media.

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