Tencent-backed Mogujie targets $200m NYSE public offering

Mogujie eyes pre-profit NYSE public offering.

Source: Unsplash.

Mogujie, a Chinese e-commerce platform backed by Tencent, filed its prospectus with the US Securities and Exchange Commissions (SEC) last Friday. The firm is gunning for a US$200 million NYSE initial public offering (IPO) under the ticker symbol ‘MOGU’.

Based in Hangzhou, Mogujie is an online fashion and lifestyle ecommerce platform. It claims an averaged 62.6 million mobile MAUs (monthly active users) across its platforms, including its flagship Mogujie app and its WeChat mini program.

The company provides on its platforms fashion tips and lifestyle content consisting of live video broadcasts, short-form videos, photographs, and articles to engage Chinese young buyers of clothing and apparel aged between 15 and 30.

In terms of funding, Mogujie has raised around US$ 411 million to-date over 5 funding rounds. Lead investors include the likes of Ping An Ventures and HOPU Investment Management.

Morgan Stanley, Credit Suisse, and China Renaissance are the underwriters for the deal.

Following Mogujie’s acquisition of fashion retailer Meilishuo in 2016, Tencent became a major shareholder, holding 18% of share ownership. This deal saw the combined entity’s valuation grow to US$3 billion at that time, according to a Forbes story.

 

Fall in marketing services revenue

Reuters previously reported of Mogujie’s intention of raising as much as USS$500 million in the public markets earlier in May this year, citing people close to the matter. Posting a loss of RMB 186 million (US$26.7 million) over the past 6 months ended Sept 30, Mogujie has cut its initial public offering target by more than 50%.

The company’s three major revenue sources are marketing services revenues (49% of total revenue), commission revenues (43%) and the others (8%), as pictured below.

Mogujie revenue sources breakdown. Source: Company prospectus.

A closer look at Mogujie’s financial performance might offer some reasons why the 26% reduction in losses when compared with 2017 was insufficient to convince investors of its future profit viability.

One clear indicator over major profitability concerns from its prospectus is: Mogujie is seeing a steep overall decline in its revenue streams. The fall in its marketing services revenue segment far outweighs the marginal increase in commissions and other revenue streams.

Source: Mogujie Prospectus.

Online fashion content boom

With Tencent as its largest backer, Mogujie is competing in the same field and in pretty much the same way with Xiaohongshu, which is backed by Alibaba.

Online fashion marketing expenditure in China. Source: Mogujie prospectus, citing iResearch data.

Both Mogujie and Xiaohongshu are vying for a booming online fashion content market that monetizes through online fashion marketing expenditure in China, which, according to market researcher iResearch, has reached around RMB190.6 billion (US$27.8 billion) in 2017 and is projected to reach RMB525.4 billion (US$76.5 billion) in 2022.

Editor: Ben Jiang