Public Venture

Chinese Online Pharma Startup 111’s IPO Slips After Disappointing Pricing

Yesterday, Chinese health-focused 111 priced its American IPO at $14 per share. 111 had originally targeted a $14 to $16 per-share price range, making its IPO price a disappointment.

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The firm sold 7.1 million shares in the offering. It had previously targeted a 9.3 million share debut. Given the lower share count, 111 raised $99.4 million at its IPO price. If the firm had sold the 9.3 million shares it had intended, that tally would have risen to $130.2 million.

The company which started life as an online pharmacy has expanded into the offline world as well. But not to its profit. 111 is unprofitable. In the first half of 2018, for example, 111 had revenue of $110.5 million, but its “cost of products sold” totaled $100.6 million. That left a slim margin to run the company with, leaving 111 with a $19.6 million net loss over the two quarters.

The question for investors was how to value the company, which grew aggregate revenue of around 68 percent from the first half of 2017 to the first half of 2018. Now we have two answers, the per-share value assigned to the company at IPO, and its current trading price of $13.27, implying that investors slightly overvalued 111 during its IPO process.

Which external entitles owned shares in 111 before its IPO? Per the company’s F-1/A, Sunny Bay Global Limited, Infinity Cosmo Limited, ClearVue YW Holdings, Verlinvest Asian, First Pharmacia, and Zall Capital.

The early declines of 111 make Chinese IPOs zero for two today when it comes to opening performance.

Illustration Credit: Li Anne Dias