What happened: Chinese digital influencer incubator Ruhnn Holding stumbled in its Nasdaq debut on Wednesday, with its stock price losing more than a third of its value by the end of the day. The Hangzhou-based company sold 10 million American Depositary Shares (ADS) at $12.5 apiece, raising $125 million in its initial public offering (IPO). Its stock prices, however, fell 37.2% to $7.85 by market close. With 113 contracted influencers such as China’s top internet celebrity Zhang Dayi, Ruhnn owns and operates online stores on third-party e-commerce platforms, primarily on Alibaba’s online marketplace Taobao, for the key opinion leaders (KOLs) it represents.
Why it’s important: Ruhnn Holding Limited is the largest KOL-based e-commerce player in China as measured by revenue, facilitating the sales of an aggregate GMV of RMB 1.2 billion (around $300 million) in 2018 with net revenue of RMB 947 million during the same period. KOL followings can reach viral heights—Zhang’s Taobao store made headlines when its sales exceeded RMB 100 million in just 30 minutes on Nov. 11 last year during Alibaba’s Singles’ Day shopping promotion. However, the Alibaba-backed company is over-reliant on a few top KOLs, and it is not yet profitable, with net losses of about RMB 90 million in 2018 more than double the 2017 figure.