Yi Po International Could Become First China Tech IPO In U.S. Since Didi Debacle

Key Takeaways:

• Yi Po International has filed to make a modest IPO in New York, which could become the first tech offering by a Chinese firm in more than half a year
• The operator of smart parking systems looks well positioned to capitalize on China’s massive car market and acute shortage of parking spaces

By Doug Young

The China-U.S. IPO pipeline has taken another important step forward in reopening, with announcement of the first new tech offering in more than a half year. At least, sort of. The latest IPO filing to the U.S. securities regulator came this week from Yi Po International Holdings Ltd. YBZN, a 4-year-old Chinese developer and operator of intelligent parking services.

We say this is “sort of” a tech company because it’s using technology to help China’s millions of car owners perform tasks like find parking spaces, navigate, make touchless payments and find their cars in the 42 parking lots where its system is installed in 18 Chinese cities. That said, it’s still a far cry from the types of internet-based companies that we most often mean when we use the term “technology companies.”

Still, it does seem significant that any type of Chinese technology company is seeking a listing in the U.S. these days, after such IPOs came to a screeching halt following the controversy surrounding the New York listing by Didi Global DIDI last July. For those who missed that, the dust-up occurred when China’s equivalent of Uber listed its shares in New York, even after being advised not to do so by China’s internet regulator pending the outcome of its ongoing data security review.

After that happened, both the U.S. and Chinese securities regulators put informal bans on new listings by Chinese companies in New York. The U.S. eased it ban late last year after deciding on how Chinese companies should properly inform investors of the risks related to a controversial corporate structure called variable interest entity (VIE) that many were using.

China also eased its stance by issuing guidelines in late December on how Chinese companies seeking U.S. listings should proceed, sending a signal that it doesn’t intend to permanently ban such listings. Top Chinese securities officials have also indicated they are talking with their U.S. counterparts on forming an information-sharing agreement that would provide U.S. regulators with access to Chinese companies’ auditors, addressing one of the other major U.S. concerns.

All that said, Yi Po’s new IPO prospectus continues a number of trends in the slow reopening of the U.S.-China IPO pipeline. The company is seeking to raise a relatively modest $27 million, continuing a trend for small fundraising amounts – typically less than $50 million – in the handful of new applications we’ve seen. That seems to indicate that the lawyers who advise these companies think they are too small to raise Beijing’s concerns regarding data security.    

The other major theme is most of these small offerings are being underwritten by second-tier investment banks, unlike earlier ones that tended to attract global giants like Goldman Sachs, Citigroup, UBS, Morgan Stanley and Credit Suisse. In this case Yi Po is using a relatively unknown underwriter named Boustead Securities.

Another name we’ve seen underwriting similarly small recent listings is Prime Number Capital, which is sponsoring IPOs by wheelchair maker Jin Medical and Meihua International, a seller of disposable medical devices. Accordingly, a return of the big investment banks will mark one of the next big milestones for these U.S. listings by Chinese firms.

Big Growth Potential

All that said, we’ll spend the second half of this space looking more closely at Yi Po, which is quite interesting due to its position in a market with lots of room for growth. We’ll also wrap up with a separate look at an updated filing this week from Meihua International, which has announced a price range for its shares, indicating its IPO could soon make its trading debut.

We’ll begin with Yi Po, whose main operating unit is a company called Jiangsu Easy Park, which was only founded four years ago in 2018. The company’s youth is evident in its financials, which show it only posted its first significant revenue in 2020.

The prospectus nicely summarizes a situation that most of China’s millions of car owners are acutely aware of, namely, that the country’s supply of parking spaces is far less than demand. The document cites third-party data saying the number of cars on China’s roads grew to 280 million in 2020 from 190 million in 2016, as demand boomed from the nation’s growing middle class.

Yet at the same time, Chinese cities added just 12.64 million new parking spaces in 2020, even as the number of new cars on the road grew by a much larger 20 million, according to the data. In the limited number of parking lots that exist, especially newer ones in top-tier cities, intelligent parking systems are quickly becoming the norm to make life easier for drivers.

Riding that trend, Yi Po’s revenue has grown from a negligible $92,000 in 2019 to $2.8 million in the first six months of 2021, the company’s prospectus shows. Its profit also grew from $47,000 to $880,000 over the same period, which looks quite impressive when one considers that many tech companies require five years or more to turn their first profits.

So, clearly this company has lots of room for growth if it can execute well and expand around China.

We’ll close with a look at Meihua, a profitable seller of low-end medical products that first filed for its listing last August and has provided an updated prospectus since then. Its latest update filed this week includes a price range of $9 to $11, which would allow it to raise up to $55 million, giving it a market value of up to $275 million.

The fundraising size in its latest filing is unchanged from the previous update, indicating the situation hasn’t changed over that time. The company doesn’t look too exciting, as it’s quite small and its revenue grew just 11% in 2020 and the first six months of 2021. But the fact that it’s giving a price range does seem to indicate a trading debut could come later this month, which would mark another important milestone in the resumption of U.S. listings by Chinese firms.