Fosun ups stake in Chinese parenting site Babytree for $5.8 million

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Founder and CEO Wang Huainan was Babytree Group’s largest shareholder until the Fosun International investment on Oct. 11, 2019. (Image credit: Babytree)

Fosun International became Chinese parenting site Babytree Group’s largest shareholder after the Hong Kong-based conglomerate increased its stake with a follow-up investment of around $5.8 million, the online parenting community announced on Friday.

Why it matters: Fosun International’s backing is a vote of confidence in the Beijing-based pregnancy and parenting platform, which is facing growing concern about its profitability and leadership.

  • Babytree’s Hong Kong initial public offering in November 2018 was a debacle. The company went public in at a $1.5 billion valuation, lower than the $2 billion valuation the previous May when Alibaba invested $214 million.
  • The size of China’s baby and parenting retail industry nearly tripled to around RMB 3 trillion in 2018 from RMB 1 trillion in 2010, according to data from research institute iiMedia, and is expected to maintain its fast growth for the next decade.

Details: Parent company Tenzing Holdings transferred 20 million Babytree shares, or 1.18% of the company’s total shares, to Fosun International’s subsidiary Startree (BVI) for HK$45.6 million, the company said in the statement.

  • After the transfer, Fosun International replaces founder and CEO Wang Huainan as the largest shareholder of the company with a 24.67% stake.
  • Wang still owns 24.27% of the firm. Shares held directly by Wang and his family’s limited partnership remains unchanged at 21.92%.
  • In late September, there were Chinese media reports about layoffs and Wang cashing in his shares and meeting with e-cigarette company Juul about a CEO role, both of which the company denied to TechNode. Wang also refuted the news during a Sept. 26 livestream on microblogging site Weibo.

Context: A former Yahoo and Google executive, Wang founded the online platform for expecting and new parents in 2007, providing pregnancy and parenting education and e-commerce.

  • Babytree Group raised around $200 million in its IPO, at the lower range of its initial offering price of HK$6.8 per share. Its shares have dropped significantly since then to around HK$2 apiece on Monday.
  • Competition from multiple Chinese tech firms going public around the same time as well as a depressed stock market forced Babytree to downsize its IPO by nearly 80%.
  • BabyTree reported operating revenue of RMB 240 million in the first half of this year, significantly lower than the RMB 408 million from the same period a year ago.
  • Babytree’s other investors include online education group TAL Education and Jumei e-commerce platforms.
  • Fosun International led a $450 million investment round in Babytree in late 2016. It has also backed Qinbaboao, a smaller player in the parenting sector.