Boqii Delists, Ends Three-Year 'Ruff' Ride On NYSE

Key Takeaways:

• Boqii is delisting from the New York Stock Exchange and moving its shares to the smaller, more thinly traded NYSE American
• Boqii’s prospects look uncertain as China’s economy slows

By Doug Young

Pet’s lives are famously short compared with their human owners, and the same seems to be even truer for Boqii Holding Ltd., operator of China’s largest platform for pet owners. This company, which once (bow-)wowed investors with its potential to consolidate China’s massive market for pet care products and services, announced this week it will leave the New York Stock Exchange just three years after its IPO.

At the end of the day, Boqii really looks like the story of a company that was quite well placed to become a major consolidator in China’s massive pet market, but wasn’t up to the challenge. The market is notoriously fragmented, populated by thousands of pet supply and grooming stores, as well as pet hospitals.

At the time of its 2020 listing, Boqii cited third-party research saying China’s pet market was expected to grow 17% annually between 2019 and 2024 to reach a massive 450 billion yuan ($62.5 billion) in annual sales by the end of that period. Just a tiny 1% of that would have translated to 4.5 billion yuan in annual sales, which isn’t dog food.

But Boqii could manage just 1.09 billion yuan in revenue for its latest fiscal year through March this year. And that figure was actually down 8% from a year earlier – hardly what you would expect from a company that people were hoping could become top cat in such a huge and fast-growing market.    

In this case it appears that Boqii’s departure from the NYSE for the smaller, more thinly traded NYSE American exchange probably isn’t voluntary. That’s because the company’s market value is now hovering dangerously close to $15 million mark – the minimum threshold for all companies listed on the New York Stock Exchange.

Boqii was worth just $15.8 million at Thursday’s close in New York, and that was after a 5% gain in its stock that day. But the shares have trended downward for nearly all of their three years on the NYSE, and it seems like only a matter of time before the company’s market value dips below the $15 million that would have automatically triggered its delisting.

This isn’t the first time Boqii has flirted with being forcibly delisted. In its brief history, the company’s stock has twice fallen below the minimum price of $1 that also triggers an automatic delisting threat. But in each of those cases, the company executed reverse share splits, including a 6-for-1 reverse split in June 2022 and a 10-for-3 reverse split in August this year, to bring its stock back above the $1 level.

Adjusting for those splits, the company’s stock has lost about 98% of its value since its headier days when it first floated shares in September 2020. Put differently, the company’s market value has cratered over the last three years from around $1 billion at the time of its IPO to the current $15 million that is forcing it off the NYSE. Not much to wag your tail about these days.

Contracting Company

Investors have never been too hot on Boqii, but at least some might have been willing to wait for it to emerge from the dog house and realize its potential during its first two years as a publicly traded company. After all, its revenue grew by a healthy 31% in its fiscal 2021 year, and another 17% in its fiscal 2022.

But then things started to go south. The company’s revenue began to contract in its fiscal year through March this year, falling 2.3% year-on-year to 590 million yuan in the six months to Sept. 30 last year. The declines accelerated in the second half of its fiscal year, with revenue down 14% year-on-year to 503 million in the six months to this March.

Boqii Chairman Liang Hao said the latest fiscal year presented “numerous challenges,” echoing a theme from many Chinese companies during that period. Most of those challenges were the result of China’s strict Covid control policies that frequently forced store closures and restricted people’s movements in a bid to stop the spread of the virus.

Pets were probably some of the biggest victims of those controls, since owners could no longer take them out for things like grooming and trips to the veterinarian – the types of services that are typically far more profitable than sales of products like pet food.

What’s more, things don’t look set to improve anytime soon. That’s because Chinese consumers are rapidly reining in their spending as the nation’s economy slows. In such uncertain times, things like a manicure for the family dog or a professional fur-trimming for the cat are probably some of the first items to get cut from people’s tightening budgets.

Reflecting that, Boqii’s base of active buyers fell 12% to 2.9 million in the six months to this March from 3.3 million a year earlier.

Truth be told, Boqii’s own revenue mix never looked that attractive either due to its high reliance on the sales of standard products like pet food, pet snacks and other pet supplies – many of those over third-party platforms that carry lower margins. Boqii derived the big majority of its revenue from product sales in its latest reporting period, with sales over its self-operated Boqii Mall and third-party platforms accounting for 39% and 57% of its total revenue, respectively.

Boqii tried to pretty up its bottom line by trimming overall operating expenses by 23.3% in the latest reporting period. But its operating loss still widened in the six months to March this year, and its net loss also grew to 76.5 million yuan from 50.9 million yuan a year earlier.

At the stock’s current level, Boqii now trades at a tiny price-to-sales (P/S) ratio of just 0.10. Pet stocks in general aren’t really too popular with investors these days, with U.S. giant Chewy CHWY trading at a P/S of 0.73, while Wag! Group PET trades the highest at a ratio of about 1.

Boqii’s departure from the NYSE could end up being temporary, since it would likely apply to return if it can get its stock comfortably back above the $15 million level. But that looks unlikely to happen anytime soon in the current climate, and a more likely scenario might see it forced to abandon even its new home on the NYSE American.