Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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Back on the 28 February this year, SaaS provider <a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan Limited (8083 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0228/2021022800069.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard by "way of introduction". Shareholders were to be offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held. The total indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. The scrip portion was based on a fair value of RMB35.73/share for Youzan Tech.
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In <a href="https://skr.ma/qgiJ9" target="_blank" rel="noopener">China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech</a>, I recommended avoiding the stock -  China Youzan was up 283% in the past year, and 44% YTD prior to the Offer announcement. 
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Disinterested Scheme Shareholders <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0506/2021050602278.pdf" target="_blank" rel="noopener">approved</a> at the First SGM on the 6 May, a rollover arrangement and other side-agreements - not the take-private proposal as was incorrectly reported by some media sources.
At the time, shares were trading at $2.09/share, down 37% since the delisting proposal. 
And shares continued to fall, with double-digit declines on multiple days including 19.5% on the 11 May on significant volume. 
The Scheme Document was expected to be posted on or before the 15 June, but was <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0715/2021071500984.pdf" target="_blank" rel="noopener">delayed</a> on that day to at least the 19 October. 
Reportedly Youzan Tech's listing application had been rejected, however, the wording in the monthly update on the <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0813/2021081300886.pdf" target="_blank" rel="noopener">13 August</a> said "Youzan Technology has been revising features of its application", a slightly varied statement to "Youzan Technology has continued to progress its application with the Stock Exchange" seen in previous monthly <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0715/2021071500984.pdf" target="_blank" rel="noopener">updates</a>. 
Shares touched a low of HK$0.71/share on the 23 August. 
<h3>The New News</h3>
China Youzan <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0830/2021083000295.pdf" target="_blank" rel="noopener">announced</a> yesterday Youzan Tech has re-filed its application for the listing of shares, which will now be done by way of an offering of new shares, not a listing by introduction. 
Both the scrip ratio and cash portion remain unchanged under China Youzan's delisting transaction, by way of Scheme.
The estimated value per Youzan Tech shares by an independent valuer is now RMB21.76 (~HK$26.20/share), down 39% from the previous indicative price. 
Therefore the proposed consideration for China Youan shareholders is HK$1.4654/share (HK$0.1352 +(HK$0.05077265 x HK$26.20)), a 100.7% premium to last close, but a 55.7% discount to last close ahead of the initial announcement in February this year. 
Shares are up ~16% in the last two trading days, but down 74% since the delisting proposal and 37% adrift of the indicative Offer price in February. Those are pretty grim performance numbers.
There's probably value to be had here at the current level, but there are a multitude of factors at work in arriving at a "fair value." Further delays in the dispatch of the Scheme Doc are feasible. And will the Exchange grant this listing application, when it clearly had issues with the prior submission?
More below the fold.
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Back on the 28 February this year, SaaS provider China Youzan Limited (8083 HK) announced a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard by "way of introduction". Shareholders were to be offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held. The total indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. The scrip portion was based on a fair value of RMB35.73/share for Youzan Tech.


In China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech, I recommended avoiding the stock -  China Youzan was up 283% in the past year, and 44% YTD prior to the Offer announcement. 


Disinterested Scheme Shareholders approved at the First SGM on the 6 May, a rollover arrangement and other side-agreements - not the take-private proposal as was incorrectly reported by some media sources.
At the time, shares were trading at $2.09/share, down 37% since the delisting proposal. 
And shares continued to fall, with double-digit declines on multiple days including 19.5% on the 11 May on significant volume. 
The Scheme Document was expected to be posted on or before the 15 June, but was delayed on that day to at least the 19 October. 
Reportedly Youzan Tech's listing application had been rejected, however, the wording in the monthly update on the 13 August said "Youzan Technology has been revising features of its application", a slightly varied statement to "Youzan Technology has continued to progress its application with the Stock Exchange" seen in previous monthly updates. 
Shares touched a low of HK$0.71/share on the 23 August. 
The New News
China Youzan announced yesterday Youzan Tech has re-filed its application for the listing of shares, which will now be done by way of an offering of new shares, not a listing by introduction. 
Both the scrip ratio and cash portion remain unchanged under China Youzan's delisting transaction, by way of Scheme.
The estimated value per Youzan Tech shares by an independent valuer is now RMB21.76 (~HK$26.20/share), down 39% from the previous indicative price. 
Therefore the proposed consideration for China Youan shareholders is HK$1.4654/share (HK$0.1352 +(HK$0.05077265 x HK$26.20)), a 100.7% premium to last close, but a 55.7% discount to last close ahead of the initial announcement in February this year. 
Shares are up ~16% in the last two trading days, but down 74% since the delisting proposal and 37% adrift of the indicative Offer price in February. Those are pretty grim performance numbers.
There's probably value to be had here at the current level, but there are a multitude of factors at work in arriving at a "fair value." Further delays in the dispatch of the Scheme Doc are feasible. And will the Exchange grant this listing application, when it clearly had issues with the prior submission?
More below the fold.


IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan (8083 HK)</a> has provided an update on its privatisation proposal. There is no change to the scheme consideration (HK$0.1352 in cash per scheme share) and the terms of the Youzan Technology distribution (0.05077265 Youzan Technology share for every China Youzan share). The key change is that Youzan Technology shares will be listed on the HKEx by way of an offering of new shares, instead of by way of introduction. The privatisation offer implies a total value of HK$1.4654 per share, which is a 100.7% premium to the last trading day price of HK$0.73 (27 August). However, the implied valuation of HK$1.4654 per share is -37% lower than the original valuation of HK$2.3088 per share (announced on 28 February 2021). As the cash consideration is unchanged, the lower valuation is driven by the decline in Youzan Technology’s estimated value between the original valuation reference date (30 November 2020) and the new valuation reference date (30 June 2021). The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). No independent shareholder holds a blocking stake.The valuer continues to base Youzan Technology's valuation by deducting the market value of the payment &amp; other business from the market cap of China Youzan. However, since the latest assessment date (30 June 2021), China Youzan’s shares have further declined -45% in part due to the Chinese tech selloff driven by the regulatory reset. Consequently, based on the valuer’s methodology, Youzan Technology’s valuation is RMB11.02 per share at the last close vs the valuation of RMB21.76 per share at the valuation reference date (30 June 2021). <div class="content-highlight">
The privatisation offer remains broadly fair in both the distribution in-specie (distribution ratio in line with the control ratio) and the cash consideration (marginally below the value of the payments business due to peer multiple re-rating).
China Youzan’s valuation hinges on the valuation of Youzan Technology, which remains in a state of flux due to the uncertain regulatory backdrop. China Youzan’s last close price of HK$0.82 per share implies that Youzan Technology is valued at a trailing EV/Sales multiple of 12.7x, broadly in line with SaaS commerce peers' current trailing EV/Sales multiple of 13.4x (but at a premium to Chinese peers). As Youzan Technology is at best fairly valued at China Youzan’s last close price, we would remain on the sidelines. 
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China Youzan (8083 HK) has provided an update on its privatisation proposal. There is no change to the scheme consideration (HK$0.1352 in cash per scheme share) and the terms of the Youzan Technology distribution (0.05077265 Youzan Technology share for every China Youzan share). The key change is that Youzan Technology shares will be listed on the HKEx by way of an offering of new shares, instead of by way of introduction. The privatisation offer implies a total value of HK$1.4654 per share, which is a 100.7% premium to the last trading day price of HK$0.73 (27 August). However, the implied valuation of HK$1.4654 per share is -37% lower than the original valuation of HK$2.3088 per share (announced on 28 February 2021). As the cash consideration is unchanged, the lower valuation is driven by the decline in Youzan Technology’s estimated value between the original valuation reference date (30 November 2020) and the new valuation reference date (30 June 2021). The key conditions precedent are the headcount test and the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). No independent shareholder holds a blocking stake.The valuer continues to base Youzan Technology's valuation by deducting the market value of the payment &amp; other business from the market cap of China Youzan. However, since the latest assessment date (30 June 2021), China Youzan’s shares have further declined -45% in part due to the Chinese tech selloff driven by the regulatory reset. Consequently, based on the valuer’s methodology, Youzan Technology’s valuation is RMB11.02 per share at the last close vs the valuation of RMB21.76 per share at the valuation reference date (30 June 2021). 
The privatisation offer remains broadly fair in both the distribution in-specie (distribution ratio in line with the control ratio) and the cash consideration (marginally below the value of the payments business due to peer multiple re-rating).
China Youzan’s valuation hinges on the valuation of Youzan Technology, which remains in a state of flux due to the uncertain regulatory backdrop. China Youzan’s last close price of HK$0.82 per share implies that Youzan Technology is valued at a trailing EV/Sales multiple of 12.7x, broadly in line with SaaS commerce peers' current trailing EV/Sales multiple of 13.4x (but at a premium to Chinese peers). As Youzan Technology is at best fairly valued at China Youzan’s last close price, we would remain on the sidelines. 


China Youzan’s Updated Privatisation Proposal

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Founded in 2003 by the CEO Anthony Casalena, Squarespace is getting ready to complete its direct public listing on May 19 on the New York Stock Exchange. Squarespace raised $300 million ($68.42 per share) in March 2021 from investors including Tiger Global, D1 Capital Partners, and Fidelity Management &amp; Research Company, valuing the company at nearly<a href="https://www.reuters.com/article/us-squarespace-funding-idUSKBN2B832O" target="_blank" rel="noopener"> $10 billion. </a>Other major investors of the company include Accel, Index Ventures, and General Atlantic. Squarespace joins a list of numerous technology companies that have become public through the direct listing route, including <a href="https://www.smartkarma.com/entities/palantir-technologies-inc" target="_blank" data-smartkarma-citation="entities:27728:1" rel="noopener">Palantir Technologies Inc (PLTR US)</a>, <a href="https://www.smartkarma.com/entities/roblox-corp" target="_blank" data-smartkarma-citation="entities:29697:1" rel="noopener">ROBLOX Corp (RBLX US)</a>, and <a href="https://www.smartkarma.com/entities/coinbase-global-inc" target="_blank" data-smartkarma-citation="entities:32227:1" rel="noopener">Coinbase (COIN US)</a>. Squarespace's shareholders have registered to sell about 40.4 million common shares with the CEO Anthony Caslena holding a 68.2% stake. Squarespace is a one-stop-shop platform for websites creation, domains, e-commerce, and marketing tools for companies and organizations to manage their social media presence. The company generated sales of $621.2 million in 2020, up 28.1% YoY. Its sales growth accelerated by 31.3% YoY to $179.7 million in 1Q 2021. Although the company benefited from higher sales and gross margins, its operating margins declined from 12.7% in 2019 to 6.5% in 2020, which was caused by higher R&amp;D and sales &amp; marketing expenses.

Founded in 2003 by the CEO Anthony Casalena, Squarespace is getting ready to complete its direct public listing on May 19 on the New York Stock Exchange. Squarespace raised $300 million ($68.42 per share) in March 2021 from investors including Tiger Global, D1 Capital Partners, and Fidelity Management &amp; Research Company, valuing the company at nearly $10 billion. Other major investors of the company include Accel, Index Ventures, and General Atlantic. Squarespace joins a list of numerous technology companies that have become public through the direct listing route, including Palantir Technologies Inc (PLTR US), ROBLOX Corp (RBLX US), and Coinbase (COIN US). Squarespace's shareholders have registered to sell about 40.4 million common shares with the CEO Anthony Caslena holding a 68.2% stake. Squarespace is a one-stop-shop platform for websites creation, domains, e-commerce, and marketing tools for companies and organizations to manage their social media presence. The company generated sales of $621.2 million in 2020, up 28.1% YoY. Its sales growth accelerated by 31.3% YoY to $179.7 million in 1Q 2021. Although the company benefited from higher sales and gross margins, its operating margins declined from 12.7% in 2019 to 6.5% in 2020, which was caused by higher R&amp;D and sales &amp; marketing expenses.

Equity Bottom-Up

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On the 28 February, e-commerce and payment solutions provider <a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan Limited (8083 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0228/2021022800069.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard. Shareholders are offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held.
All in, the indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. China Youzan was up 283% in the past year, and 44% YTD prior to the offer. 
In <a href="https://skr.ma/qgiJ9" target="_blank" rel="noopener">China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech</a>, I recommended avoiding the stock, with a view to re-entering if it closed in on the implied fair value using peer multiples, or ~HK$2.20/share. 
On the 6  May, Disinterested Scheme Shareholders <a href="https://www1.hkexnews.hk/listedco/listconews/gem/2021/0506/2021050602278.pdf" target="_blank" rel="noopener">approved</a> at the First SGM a rollover arrangement and other side-agreements - not the take-private proposal as has been incorrectly reported by some media sources. The Scheme Document is expected to be posted on or before the 15 June. 
Shares closed today at $2.09/share, down 5.4%, and down 37% since the delisting proposal. 
This is starting to look more attractive.
</div>


On the 28 February, e-commerce and payment solutions provider China Youzan Limited (8083 HK) announced a pre-conditional Offer by way of a Scheme to take its GEM-listed shares private, then list 51.7%-held Youzan Technology on Hong Kong's mainboard. Shareholders are offered HK$0.1352/share in cash plus an in-specie distribution of 0.05077265 Youzan Technology shares for every China Youzan share held.
All in, the indicative Offer price was HK$2.3088/share, a 30.2% discount to last close. China Youzan was up 283% in the past year, and 44% YTD prior to the offer. 
In China Youzan (8083 HK): Proposal Towards Relisting Youzan Tech, I recommended avoiding the stock, with a view to re-entering if it closed in on the implied fair value using peer multiples, or ~HK$2.20/share. 
On the 6  May, Disinterested Scheme Shareholders approved at the First SGM a rollover arrangement and other side-agreements - not the take-private proposal as has been incorrectly reported by some media sources. The Scheme Document is expected to be posted on or before the 15 June. 
Shares closed today at $2.09/share, down 5.4%, and down 37% since the delisting proposal. 
This is starting to look more attractive.


China Youzan (8083 HK): Reality Check As Shares Rollover

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Youzan Technology (YT) is looking to list by way of introduction, as its parent <a href="https://www.smartkarma.com/entities/china-youzan-limited" target="_blank" data-smartkarma-citation="entities:11467:1" rel="noopener">China Youzan Limited (8083 HK)</a> aims to distribute its shares in YT and pay some cash on top and delist.
While we normally don't cover such listings, as there will be no bookbuild etc, in this insight, we take a quick look based on a special client's request.

Youzan Technology (YT) is looking to list by way of introduction, as its parent China Youzan Limited (8083 HK) aims to distribute its shares in YT and pay some cash on top and delist.
While we normally don't cover such listings, as there will be no bookbuild etc, in this insight, we take a quick look based on a special client's request.

Youzan Technology IPO Quick Look- Great Headline Numbers but Client Growth Is Slow and Churn Is High

United States

BigCommerce Holdings, Inc. operates as a software company. The Company offers SaaS platform for cross-channel commerce and cloud-based e-commerce solution that scales with business growth. BigCommerce Holdings serves customers worldwide.

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BigCommerce Holdings (BIGC US)

China Youzan (8083 HK): Once Bitten ...

But I would avoid this stock and extremely volatile. Plus there is a question mark over timing, and whether the listing gets Exchange approval. I...

David Blennerhassett

China Youzan’s Updated Privatisation Proposal

China Youzan’s valuation hinges on the valuation of Youzan Technology, which remains in a state of flux. As Youzan Technology is at best fairly...

Arun George

Squarespace Direct Listing Preview

Squarespace is getting ready to complete its direct public listing on May 19 on the New York Stock Exchange. In this insight, we provide the key...

Douglas Kim

China Youzan (8083 HK): Reality Check As Shares Rollover

Buying China Youzan means you are buying the Youzan Tech IPO at an Implied EV/sales multiple. That's around a 10% premium to peers currently. The...

David Blennerhassett

Youzan Technology IPO Quick Look- Great Headline Numbers but Client Growth Is Slow and Churn Is High

Youzan Technology (YT) is looking to list by way of introduction, as its parent China Youzan Limited (8083 HK) aims to distribute its shares in YT...

Sumeet Singh

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