Bike-rental firm Youon seeks IPO

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Bike-rental firm Youon submitted today an updated initial public offering prospectus to China’s securities regulator, seeking a listing in the country’s A-share market, local media is reporting (in Chinese).

If successful, it will be the first bike-rental IPO in the country.

Youon Public Bicycle System Co., Ltd. (“常州永安公共自行车系统股份有限公司” in Chinese), the firm behind bike-rental service Youon, is filing for an IPO to raise RMB 598 million for purposes of research and development, business operation and bank loan repayment, according to an online statement issued last Friday by the China Securities Regulatory Commission.

“Bike-sharing” is the highlight in the updated prospectus, compared with the version filed in June 2015, according to the firm’s prospectus (in Chinese).

In late February, the firm’s subsidiary Youon Low Carbon Technology (永安行低碳科技有限公司 in Chinese), the operator of bike-rental service Youon, announced it had secured an undisclosed amount of series A funding from investors including Ant Financial (the financial affiliate of Chinese e-commerce giant Alibaba), IDG Capital and Shenzhen Capital Group.

In March 1, Youon Low Carbon inked a capital increase deal to sell minority stake to its investors including Ant Financial and Shenzhen Capital Group.

However, the firm terminated the agreement with the aforementioned investors on the eve of the IPO application, as it took into account the recent public concerns towards the chaotic operation and management of the bike-rental sector.

The firm stressed that they made the decision out of a responsible attitude towards investors and in the principle of prudent investment. And the firm’s investors said they will continue to support Youon in its efforts to expand the bike-rental service and will resume the investment negotiation again when timing is ripe.

Ant Financial still has a say in the firm, as its wholly-owned subsidiary Shanghai Yunxin Venture Investment remained the firm’s third largest shareholder by holding an 11.11% stake in the firm.

 A BD director from Ant Financial had also taken a seat on the board.

The firm put the capital increase deal on hold after recent setbacks during their rollout of the dockless bike-rental service in tier-2 and tier-3 cities, where their bikes were frequently confiscated by chengguan staff (“城管”in Chinese; refers to “city management” departments) for illegal parking. 

According to the prospectus, Changzhou-based Youon Public Bicycle System was established in 2010. The company’s main business includes sale of public bikes, operation of a government-funded public bike sharing platform (docking stations required), and that of dockless bike-rental services funded by private investors.

The firm has seen an annual compound annual growth of 28.27% from 2014 to 2016. Last year, the firm derived the majority of its revenue from the sale (RMB 239 million) and operation (RMB 533 million) of public bicycles, with the two businesses combined accounting for 99.8% of its total revenue.

In contrast, revenue from its bike-rental service reached RMB 368,000, representing a mere 0.05% of its total revenue last year.

Unlike ofo and Mobike which are fighting at close quarters in tier-one and tier-two cities, the firm mainly focuses on tier-three and lower-rung cities, with the operation of government-funded public bicycles as its business core. According to its financial results, up to 85% to 90% of its revenue came from tier-3 and lower-rung cities. This has helped the firm to fend off competition from the new rivals.

Riding the bike-rental boom, Youon kick-started its mass launch of the dockless bike-rental service last December, but was deterred amid the cutthroat competition, where top two players ofo and Mobike have claimed overwhelming market shares.