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.

Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/soulgate-inc" target="_blank" data-smartkarma-citation="entities:33304:1" rel="noopener">Soulgate (SSR US)</a> is an alternative social networking platform that lets users have virtual identities and aims to recommend to each user (referred to as a Souler) curated content and other Soulers with similar personalities, lifestyles and interests, enabling more in-depth interactions and more meaningful connections. Soulgate is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (49.9% of outstanding shares, 25.7% of outstanding shares). </p></div><div>
<p>At the mid-point of the proposed IPO price range of $13.0-15.00 per ADS, Soulgate will have a market cap of $1.7 billion. New investors Janus Henderson and Boyu Capital intend to purchase a total of $80 million worth of ADSs in the offering (43.3% of the deal). At the mid-point of the IPO price range, the net proceeds including the concurrent private placement are $257.3 million. </p>
<p>Soulgate will also raise an additional $89 million in a concurrent private placement with miHoYo. miHoYo was founded in 2012 by three Shanghai Jiaotong University graduate students. miHoYo is the creator of <em>Genshin Impact</em>, an open-world action role-playing game released in 2020, and one of the highest-grossing mobile games. It is not entirely clear if there are any near-term synergies through this investment. Currently, Soulgate's exposure to games is largely limited to its <em>Werewolf Rooms</em> (a subset of its <em>Animated Partyroom</em> app functionality) which enable users to play the popular board game <em>Werewolf</em>.</p>
</div><div><div>
<p>In <a href="https://www.smartkarma.com/insights/soulgate-ipo-initiation-lost-soul" target="_blank" data-smartkarma-citation="insights:51651" rel="noopener">Soulgate IPO Initiation: Lost Soul,</a> we opined at first glance, Soulgate is well-positioned to benefit from a sizeable China’s mobile social networking market. The strong growth in users, fast-paced revenue growth and ongoing revenue diversification suggest that Soulgate is heading in the right direction. However, the high S&amp;M expenses which exceeded revenue in each of the last three quarters, suggests that Soulgate is aggressively chasing user growth without paying much heed to monetisation and payback periods. This modus operandi is highly reflective of growth at all costs strategy. Overall, we think that the negatives in the Soulgate story warrant a pass.  </p>
<div class="content-highlight"><p>Our valuation analysis suggests that the IPO price range fairly values Soulgate for its forecasted growth. Overall, as we remain unconvinced that Soulgate's growth at all costs strategy will generate shareholder value, we are inclined to give this IPO a pass. </p></div>
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Soulgate (SSR US) is an alternative social networking platform that lets users have virtual identities and aims to recommend to each user (referred to as a Souler) curated content and other Soulers with similar personalities, lifestyles and interests, enabling more in-depth interactions and more meaningful connections. Soulgate is backed by Tencent (700 HK) (49.9% of outstanding shares, 25.7% of outstanding shares). 
At the mid-point of the proposed IPO price range of $13.0-15.00 per ADS, Soulgate will have a market cap of $1.7 billion. New investors Janus Henderson and Boyu Capital intend to purchase a total of $80 million worth of ADSs in the offering (43.3% of the deal). At the mid-point of the IPO price range, the net proceeds including the concurrent private placement are $257.3 million. 
Soulgate will also raise an additional $89 million in a concurrent private placement with miHoYo. miHoYo was founded in 2012 by three Shanghai Jiaotong University graduate students. miHoYo is the creator of Genshin Impact, an open-world action role-playing game released in 2020, and one of the highest-grossing mobile games. It is not entirely clear if there are any near-term synergies through this investment. Currently, Soulgate's exposure to games is largely limited to its Werewolf Rooms (a subset of its Animated Partyroom app functionality) which enable users to play the popular board game Werewolf.

In Soulgate IPO Initiation: Lost Soul, we opined at first glance, Soulgate is well-positioned to benefit from a sizeable China’s mobile social networking market. The strong growth in users, fast-paced revenue growth and ongoing revenue diversification suggest that Soulgate is heading in the right direction. However, the high S&amp;M expenses which exceeded revenue in each of the last three quarters, suggests that Soulgate is aggressively chasing user growth without paying much heed to monetisation and payback periods. This modus operandi is highly reflective of growth at all costs strategy. Overall, we think that the negatives in the Soulgate story warrant a pass.  
Our valuation analysis suggests that the IPO price range fairly values Soulgate for its forecasted growth. Overall, as we remain unconvinced that Soulgate's growth at all costs strategy will generate shareholder value, we are inclined to give this IPO a pass. 


APAC IPOs & Placements

Zhen Zhou, Toh

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.

<p><a href="https://www.smartkarma.com/entities/soulgate-inc" target="_blank" data-smartkarma-citation="entities:33304:1" rel="noopener">Soulgate (SSR US)</a> is looking to raise up to US$293m in its U.S. IPO. This includes the US$89 concurrent placement to be sold to MIHOYO.</p><p>Soulgate Inc. (SGI) operates Soul app which is an algorithm-driven online social playground. The app is targeted at the younger generations audience (usually born after 1990s) and it aims to provide a virtual space for users (often referred to as Soulers) to connect and build social relationships through virtual identities and multi-media content. </p><p>In this note, we will take a brief look at the app, compare Soulgate to other Chinese social media platforms, and share our thoughts on valuation and deal dynamics.</p><p>We previously covered the IPO in:</p><ul><li>
<a href="https://www.smartkarma.com/insights/soulgate-pre-ipo-unsustainable-virtual-connection" target="_blank" data-smartkarma-citation="insights:51473" rel="noopener">Soulgate Pre-IPO - Unsustainable Virtual Connection</a> </li></ul>

Soulgate (SSR US) is looking to raise up to US$293m in its U.S. IPO. This includes the US$89 concurrent placement to be sold to MIHOYO.Soulgate Inc. (SGI) operates Soul app which is an algorithm-driven online social playground. The app is targeted at the younger generations audience (usually born after 1990s) and it aims to provide a virtual space for users (often referred to as Soulers) to connect and build social relationships through virtual identities and multi-media content. In this note, we will take a brief look at the app, compare Soulgate to other Chinese social media platforms, and share our thoughts on valuation and deal dynamics.We previously covered the IPO in:
Soulgate Pre-IPO - Unsustainable Virtual Connection 

Soulgate IPO - MIHOYO Could Change the Game, Worth a Bet

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

<div><p><a href="https://www.smartkarma.com/entities/aihuishou" target="_blank" data-smartkarma-citation="entities:33426:1" rel="noopener">Aihuishou (RERE US)</a> (AHS), China’s largest pre-owned consumer electronics transactions and services platform, raised around US$230m via a US listing. It is backed by <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>, Morningside and Tiger Global.</p></div><div><p>We covered some aspects of the deal in our earlier notes:</p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/aihuishou-pre-ipo-mostly-positive-pre-owned-but-well-loved" target="_blank" rel="noopener">AiHuiShou Pre-IPO - Mostly Positive - Pre-Owned but Well Loved</a>. </li>
<li><a href="https://www.smartkarma.com/insights/aihuishou-pre-ipo-first-stab-at-valuation" target="_blank" rel="noopener">AiHuiShou Pre-IPO - First Stab at Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/aihuishou-pre-ipo-pricing-my-mobile-handset-at-physical-stores" target="_blank" rel="noopener">Aihuishou (爱回收) Pre-IPO: Pricing My Mobile Handset at Physical Stores</a></li>
</ul></div><div>
<ul><li><a href="https://www.smartkarma.com/insights/aihuishou-ipo-priced-to-go-but-won-t-do-a-kanzhun" target="_blank" rel="noopener">AiHuiShou IPO - Priced to Go but Won’t Do a Kanzhun</a></li></ul>
<p>In this note, we will talk about the trading dynamics.</p>
</div>

Aihuishou (RERE US) (AHS), China’s largest pre-owned consumer electronics transactions and services platform, raised around US$230m via a US listing. It is backed by JD.com Inc (ADR) (JD US), Morningside and Tiger Global.We covered some aspects of the deal in our earlier notes:

AiHuiShou Pre-IPO - Mostly Positive - Pre-Owned but Well Loved. 
AiHuiShou Pre-IPO - First Stab at Valuation
Aihuishou (爱回收) Pre-IPO: Pricing My Mobile Handset at Physical Stores

AiHuiShou IPO - Priced to Go but Won’t Do a Kanzhun
In this note, we will talk about the trading dynamics.


AiHuiShou IPO Trading - Probably Close to Fair Value but Has a Long Runway

<p><a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a>/Xiaoju Kuaizhi is the world's largest mobility technology platform by annual active users and by average daily transactions for the twelve months ended 31 March 2021, according to CIC. Xiaoju Kuaizhi is best known for its <em>DiDi Chuxing</em> app in China where consumers can access mobility and other essential services. Didi is seeking to raise as much as $10 billion through a US listing, according to press reports. Didi is backed by Softbank Vision Fund (21.5% stake), <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> (12.8%), <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (6.8%), <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> and <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a>. </p><p>In <a href="https://www.smartkarma.com/insights/didi-chuxing-xiaoju-kuaizhi-initiation-in-for-a-bumpy-ride" target="_blank" data-smartkarma-citation="insights:53014" rel="noopener">Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?</a>, we opined that Didi’s core china mobility business is heading on the right trajectory with rising growth and improving margin. However, Didi is saddled with two other businesses (international and other initiatives) which are driven by its global ambitions and its desire to provide a broad array of service offerings to consumers and drivers. This ecosystem strategy is sensible for a company that possesses a highly profitable and cash generative core business. Unfortunately, Didi’s core china mobility business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. </p><p>Today, <a href="https://www.reuters.com/business/autos-transportation/exclusive-chinas-ipo-bound-didi-probed-antitrust-violations-sources-2021-06-17/" target="_blank" rel="noopener">Reuters reported</a> that China's market regulator (SAMR) has begun an antitrust probe into Didi. SAMR is examining if Didi used any competitive practices that squeezed out smaller rivals unfairly. The regulator is also examining whether the pricing mechanism used by Didi's china mobility business is sufficiently transparent. Didi declined to comment on "<em>unsubstantiated speculation from unnamed source(s).</em>"</p><div class="content-highlight"><p>In this note, we examine the key financial metrics of Didi china mobility and international business to the relevant business units of its peers - Uber, <a href="https://www.smartkarma.com/entities/lyft-inc" target="_blank" data-smartkarma-citation="entities:24423:1" rel="noopener">Lyft Inc (LYFT US)</a> and <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a>. Our analysis suggests that Didi offers a trade-off between growth and profitability in comparison to its peers. Overall, in combination with the ongoing regulatory overhang, we are inclined to remain on the sidelines.   </p></div>

DiDi Chuxing (DIDI US)/Xiaoju Kuaizhi is the world's largest mobility technology platform by annual active users and by average daily transactions for the twelve months ended 31 March 2021, according to CIC. Xiaoju Kuaizhi is best known for its DiDi Chuxing app in China where consumers can access mobility and other essential services. Didi is seeking to raise as much as $10 billion through a US listing, according to press reports. Didi is backed by Softbank Vision Fund (21.5% stake), Uber (UBER US) (12.8%), Tencent (700 HK) (6.8%), Alibaba Group (BABA US) and Toyota Motor (7203 JP). In Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?, we opined that Didi’s core china mobility business is heading on the right trajectory with rising growth and improving margin. However, Didi is saddled with two other businesses (international and other initiatives) which are driven by its global ambitions and its desire to provide a broad array of service offerings to consumers and drivers. This ecosystem strategy is sensible for a company that possesses a highly profitable and cash generative core business. Unfortunately, Didi’s core china mobility business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. Today, Reuters reported that China's market regulator (SAMR) has begun an antitrust probe into Didi. SAMR is examining if Didi used any competitive practices that squeezed out smaller rivals unfairly. The regulator is also examining whether the pricing mechanism used by Didi's china mobility business is sufficiently transparent. Didi declined to comment on "unsubstantiated speculation from unnamed source(s)."In this note, we examine the key financial metrics of Didi china mobility and international business to the relevant business units of its peers - Uber, Lyft Inc (LYFT US) and Grab (0967655D SP). Our analysis suggests that Didi offers a trade-off between growth and profitability in comparison to its peers. Overall, in combination with the ongoing regulatory overhang, we are inclined to remain on the sidelines.   

Xiaoju Kuaizhi (Didi Chuxing) IPO: Growth Vs Margin

Telco/Internet specialist

Kirk Boodry

Redex Research

<p>Didi Chuxing is the dominant ride-hailing platform in one of the world’s most compelling markets for shared mobility. It is a global leader in some respects (number of active users, drivers, and transactions) and its IPO could represent the second-largest China IPO in the US trailing only eCommerce giant Alibaba Group. We value Didi Chuxing at $63/share (the ADR exchange has not yet been announced) which implies a pre-IPO equity value for the entire company of $70bn. </p><p>This report includes full financial forecasts, valuation, a summary of investment highlights and a list of questions we would ask on the roadshow.</p>

Didi Chuxing is the dominant ride-hailing platform in one of the world’s most compelling markets for shared mobility. It is a global leader in some respects (number of active users, drivers, and transactions) and its IPO could represent the second-largest China IPO in the US trailing only eCommerce giant Alibaba Group. We value Didi Chuxing at $63/share (the ADR exchange has not yet been announced) which implies a pre-IPO equity value for the entire company of $70bn. This report includes full financial forecasts, valuation, a summary of investment highlights and a list of questions we would ask on the roadshow.

Didi Chuxing and Softbank - Long Awaited IPO of China’s Mobility Giant Worth $70bn

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent (700 HK)

Soulgate IPO: Valuation Insights

The IPO price range fairly values Soulgate for its forecasted growth. However, as we remain unconvinced that Soulgate's strategy will generate...

Arun George

Soulgate IPO - MIHOYO Could Change the Game, Worth a Bet

Soulgate (SSR US) is looking to raise up to US$293m in its U.S. IPO. This includes the US$89 concurrent placement to be sold to MIHOYO.

Zhen Zhou, Toh

AiHuiShou IPO Trading - Probably Close to Fair Value but Has a Long Runway

Aihuishou (RERE US), China’s largest pre-owned consumer electronics transactions and services platform, raised up to US$243m via a US listing. It...

Sumeet Singh

Xiaoju Kuaizhi (Didi Chuxing) IPO: Growth Vs Margin

We examine the key financial metrics of Didi to the relevant business units of its peers. Overall, in combination with the ongoing regulatory...

Arun George

Didi Chuxing and Softbank - Long Awaited IPO of China’s Mobility Giant Worth $70bn

This report includes full financial forecasts/valuation, the investment case top down and bottom-up,, Uber comps and a list of questions we would...

Kirk Boodry

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