Bottom line: Live streaming gamer DouYu should get relatively strong demand for its $500 million New York IPO, while a smaller listing plan by younger coffee specialist Luckin is likely to die on the vine.
Coffee specialist Luckin brews up Wall Street IPO
One of the longest runs I can recall for New York IPOs by Chinese firms continues to chug ahead, with two new filings, one by live streaming game operator DouYu and the other by a high-tech Starbucks (Nasdaq: SBUX) challenger tabbed Luckin. This particular IPO window is now rapidly creeping up on its second year-end and doesn’t seem to show too many signs of running out of steam.
The big difference between companies coming to market now is that many are younger and still losing big money, compared with companies older in the wave that were older and mostly profitable. That’s not too surprising, since usually the most profitable companies move to the front of the line considering they’re naturally increasingly attractive.
By comparison, I really don’t see that much lulu in DouYu and expressly in Luckin. In the specimen of Luckin, the visitor is going to market just two years without its founding, which smacks of opportunism and moreover a unrepealable stratum of desperation. But increasingly on that shortly.
Let’s uncork with DouYu, since that’s the larger and slightly increasingly lulu of these two offerings, in my unobtrusive opinion. The visitor comes from the hot live-streaming space, with a focus on games, and has filed for an IPO to raise an impressive $500 million. The visitor says it’s first in its matriculation in the zone of esports, with increasingly than 150 million users signing in each month to watch or play on its platforms.
DouYu’s revenue is growing quite strongly, roughly doubling to well-nigh 3.7 billion yuan ($550 million) last year. But its net loss moreover widened last year, though by a less severe 44 percent, to 883 million yuan. The visitor launched its platform in 2014, making it a relatively youthful five years old. But the numbers do seem to be trending in the widely right direction, since revenue is growing far faster than the company’s losses.
Babe in the Woods
By comparison, Luckin is just a tomboy in the woods, having only been founded two years ago and opening its first coffee shops just a year and a half ago. Whereas I’m not that familiar with Douyu, I’m quite familiar with Luckin since there’s one in the lobby of my towers and I now go there each day for my morning coffee.
One thing I can say well-nigh this visitor is they’re extremely aggressive. They offer nonstop promotions to get people hooked, and moreover have a relatively intriguing merchantry model of forcing everyone to use their app. No onsite orders are accepted, and neither is cash. They moreover have a minimalist tideway to their stores, which are quite small with little or no seating and staffed by just two or three people.
The company’s rapid expansion and warlike promotions ways it is rapidly urgent through cash, plane as it’s posting some relatively impressive revenue for such a young firm. It had 2,370 stores in China at the end of March, which is no small feat for someone that young. It posted well-nigh 480 million yuan in revenue in this year’s first quarter alone, which is once increasingly than half of its total for all last year. But it moreover posted a 572 million yuan loss for the quarter, then not too surprising given its warlike ways.
Luckin is looking to Wall Street investors for $100 million, which sounds relatively modest. But honestly speaking, this is a visitor that is probably still years yonder from profits at best, and I personally doubt they will live long unbearable to overly reach profitability at all. They are certainly giving Starbucks a run for their money here in China at the moment, mostly due to their warlike marketing.
At the end of the day, I do expect that DouYu will vamp some investor sustentation due to its first-in-class status. Rival live streamer Huya (NYSE: HUYA) made its own New York IPO well-nigh a year ago, and its shares are now well-nigh double the listing price, meaning people see some value in this space. By comparison, I doubt investors will see much value in Luckin’s money-burning ways, and could hands see this particular IPO getting scrapped due to lack of interest.