GigaCloud, an online platform that connects manufacturers of bulky consumer goods with buyers around the world, raised $36 million in gross proceeds from the sale of 2.94 million Class A shares. The deal valued the company at $486 million. The amount raised could increase to $41 million if the underwriter sells more shares to exercise so-called over-allotment options, typically when the shares are in high demand.
Shares of the company surged in the first day of trading, closing up 28% at $15.69 on Thursday.
Based in Suzhou, east China’s Jiangsu Province, GigaCloud sources bulk items such as furniture, home appliances, and fitness equipment from China and other countries. It sells them to buyers and retailers in the US, Europe, Japan and other locations, providing logistics, warehousing and technological solutions. The company counts the United States among its largest markets, where it generates more than half of its sales. His customers include sellers on Amazon.
GigaCloud sources large items like furniture and sells them to buyers and retailers while providing logistics, warehousing, and technology solutions.
Photo: GigaCloud Technology Inc.
Such a business model has allowed the company to clear regulatory hurdles in the US even after the Securities and Exchange Commission tightened the screws on Chinese IPOs. Though the company is headquartered in China, where it employs most of its staff, GigaCloud generates all of its revenue outside of the country. Chief Financial Officer David Lau said this makes GigaCloud less vulnerable to potential regulatory changes in China.
The company also said it was willing to change auditors if it needed to do so to comply with U.S. laws so it could not be delisted three years later.
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“Like many other Chinese companies planning to list in the US, we took a pause after the Didi instance. But we decided to go ahead because we want to list in a market closer to our customers,” said Mr. Lau, referring to Beijing’s regulatory attack on ride-hailing giant Didi Global Inc. DIDIY 5.00% in the past year.
Chinese authorities launched an investigation days after Didi went public in New York in July 2021. Around the same time, the SEC cracked down on Chinese IPOs, citing regulatory risks. Government scrutiny from both sides of the Pacific caused Chinese listings in the US to come to a near halt. According to data from Dealogic, as of August 2021, only eight Chinese companies — including three blank check firms — are listed in the U.S., raising a total of $641 million. For comparison, since Alibaba Group Holding Ltd.’s groundbreaking IPO BABA 1.08% in 2014 raised billions of dollars on average each year.
Didi was eventually delisted from the New York Stock Exchange and fined $1.2 billion by China for cybersecurity and other regulatory violations.
After Chinese ride-hailing giant Didi made its Wall Street debut, Beijing said it plans to tighten rules on domestic companies looking to raise money abroad. WSJ’s Yoko Kubota takes a Didi ride to explain what the crackdown means for China’s tech titans and investors. Photo illustration: Ang Li
A decades-long audit patch between Washington and Beijing threatens to force Chinese companies off US stock exchanges. The US accounting authorities cannot see the audit records of these companies and failure to do so for three consecutive years will result in delisting under the provisions of the Holding Foreign Companies Accountable Act.
Several companies have taken steps to comply with the law, such as: B. changing their SEC filings to US-based auditors as the two countries continue to bicker over audit inspections.
GigaCloud, which currently serves as an auditor in KPMG’s China office, is willing to switch to an auditing firm open to inspection by US regulators if the two countries fail to resolve the issue, according to Chief Executive Larry Wu. “Neither our revenue nor our data is located in mainland China. There are no hurdles if we switch to an accountant based outside of China,” he said.
The company had sales of $414 million and net income of $29 million last year.
The path taken by GigaCloud could bring confidence to future Chinese IPOs and their investors, said Frank Hurst Lin, general partner at venture capital firm DCM and one of the early investors in GigaCloud. “Investors in both private and public markets are not writing China off at all. It all boils down to the individual companies and entrepreneurs,” he said.
DCM, which has $4.2 billion under management, has several companies in its portfolio considering a US listing, Mr. Lin added.
write to Jing Yang at [email protected]
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