BabyTree’s $217m stock sale saw 18% over-subscription

BabyTree prices offer price at the lower-end range.

Source: PixaBay

Alibaba-backed online parenting service provider BabyTree Group is set to go public at the Hong Kong Exchange (HKEx) on Tuesday raising up to US$217 million instead of the earlier expected US$1 billion. After slashing its issue price to HKD 6.8 apiece (USD 0.87), the company saw an over 18% over-subscription rate for its intended 250 million share issue.

BabyTree cutting its IPO size is just one example of a series of down rounds amidst the global market uncertainty. Industry Data Provider PitchBook revealed that 11.8% of all deals involving venture capital experienced valuation drops this year.

11-year-old BabyTree has grown to become China’s largest and most active community platform for mothers and infants in terms of the number of monthly active users (MAUs), according to a Frost & Sullivan Report. Just in 2017 alone, its average MAU was 139 million.

The company‘s revenue sources mainly come from advertising and e-commerce, and these have grown consistently from RMB 200 million (US$28.8 million) to RMB 729 million (US$105 million) over the period 2015-2017.

“To promote the brand, cultivate talent and consolidation of the industry, going for an IPO is our core strategy,” said Wang Huainan, the founder, and CEO of Babytree at the company’s recent press conference. Active investors, positive cash flows, and expansion plans are what Wang believes that will make BabyTree a profitable company.

As Babytree’s 4th largest shareholder, Alibaba will exercise anti-dilution rights, effectively pumping more cash into the company. And this is one of the 130 investments Alibaba did since 2015 in an aim to build up an ecosystem, according to Reuters citing Refinitiv’s data.

Editor: Ben Jiang

(Correction: An earlier version of the story incorrectly stated the oversubscription rate, it should be 18% instead of 15%.)