Hello Inc., the bike rental startup behind China’s ubiquitous blue HelloBikes, has submitted a prospectus to the US Securities and Exchange Commission in preparation for a Nasdaq IPO. This is a rare look into the economics of the bike-sharing industry, as it’s the first time a company in the sector has released extensive financial data.
Why it matters: Hello’s filing is a sign that the once-volatile bike rental industry is moving beyond its growth phase.
- Hello and its competitors Qingju (an offshoot of Didi) and Meituan Bike survived the initial price wars and are shifting priorities from investment to profit.
Details: The numbers in the filing reveal that Hello still has a ways to go to reach maturity.
- The company has yet to turn a yearly profit. Nevertheless, its figures have been steadily improving, rising from a net loss of RMB 2.2 billion ($340 million) in 2018 to RMB 170 million in 2020.
- The company’s revenue grew 25% to reach RMB 6 billion in 2020.
- Hello hopes to raise $100 million in its Nasdaq debut.
- The company has diversified beyond bike rental. Hello has added electric bikes to capture more of the market, and its ride-hailing platform has proven to be a strong competitor to market leader Didi
On track for profits? Industry experts weigh in.
- “For me, the main surprises [from the company’s filing] were around HelloBike’s market share. On the basis of its figures, alongside research it commissioned, HelloBike is the world’s largest bike rental provider, China’s second-largest carpool platform, and the country’s third-largest local services platform,” Michael Norris, research and strategy manager at AgencyChina, told TechNode.
- Doug Young of the market research agency The Bamboo Works was less optimistic: “The company’s net loss attributable to ordinary shareholders ballooned by 50% last year to RMB 4.5 billion ($700 million) … Also, somewhat worrisome were figures for the company’s shared bike and electric scooter transaction volume, which is its core business and accounts for 91% of revenue. The prospectus showed revenue from that part of the service actually fell in every quarter of last year from the same quarter a year earlier, including a 6% drop in the fourth quarter.”
- The company warns that it is not immune to Beijing’s recent crackdown on tech firms. Among the risks the company mentioned in its filing is the possibility of anti-monopoly claims. Hello’s main competitors Didi and Meituan have both been subject to fines from regulators in the last two months.
“HelloBike was a latecomer to the bike-sharing money wars. Its come-from-behind two-wheel leadership, as well as its growing carpool share, suggest the company is the beneficiary of savvy strategists and operators.”—Michael Norris
Context: At its peak, 80 companies around China operated in the bike rental industry. But the sector soon became bloated and dozens of these firms went under.
- The three remaining dominant bike rental players have survived in part because of deep-pocketed backers: Meituan Bike was formerly Mobike before being absorbed into lifestyle services giant Meituan, Hellobike’s largest shareholder is Alibaba’s Ant Group, and Qingju is of course under Didi.
- Their success is also due to evolving market strategies, raising prices and expanding offerings to develop sustainable businesses.
- Energy Monster, the leader in China’s power bank rental market, is another sharing economy representative that has recently IPO’d on Nasdaq.