China neighborhood online grocer MissFresh added its name on Friday to the largest group of U.S. IPOs in 21 years in the second quarter; its debut, however, was less than enviable.
Shares in MissFresh plunged by 25.7% from their IPO price in Nasdaq trading, closing at $9.66. The company had raised $273 million from selling stock at $13 per ADR this month.
Founder and CEO Xu Zheng was a long-time executive at Beijing computer maker Lenovo, leading its notebook business group in 2001-2012 and then working as general manager of the fruit business at online food unit Lenovo Joyvio until he set up MissFresh in 2014. Leaders at Lenovo “knew I always had a dream to start my own company,” Xu said in a Zoom interview.
Xu’s hopeful about the neighborhood grocery business in part because of continuing population growth and rising incomes in China’s biggest cities. “The big cities are becoming mega cities, and people are having more and more demand for consumption upgrade, for quality and convenience,” Xu said.
The 40-year-old attributed MissFresh’s success to keeping an eye on the longer term. “We have always been thinking about the long term” and how to build channels that meet the needs of the next generation of consumers, Xu said from Beijing, where MissFresh is headquartered.
Industry data looks promising: China’s neighborhood retail market reached 11.9 trillion yuan in 2020 — 5.0 trillion yuan from fresh produce and 6.9 trillion yuan from fast-moving consumer goods, according to figures in MissFresh’s prospectus. The market is expected to further expand to 15.7 trillion yuan by 2025. Food is the largest product group.
Yet key first-quarter financials at MissFresh weren’t as good as a year ago. Revenue in the first quarter of 2021 slid to 1.53 billion yuan, or $233 million, from 1.69 billion yuan a year earlier; its loss widened to 610.3 million yuan, or $93.1 million, from 194.6 million a year ago. The company faces heady e-commerce competition from rivals controlled by the likes of Alibaba and JD.com, among others.
MissFresh nevertheless on Friday joined a U.S. IPO market that had its busiest quarter in more than two decades in April-May , with 113 IPOs raising $39.9 billion, according to Renaissance Capital. June was the busiest single month since August 2000, Renaissance said. China IPOs in the U.S. included AiHuiShou, Tuya, New Truck Alliance and Kanzhun; Didi is reportedly coming soon.
When it comes to raising money, Xu said finding common ground with investors facilitates long term relations with that group. MissFresh shareholders include Tencent, which holds a 7% stake. To help with communication, Xu did six nighttime media interviews on listing day on Friday.
He may need more of those communication skills, however, as he works to get the business on a better growth track in the rest of the year.
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China Online Grocer MissFresh Drops 26% On Nasdaq Debut; CEO Sees Growth Prospects - Forbes
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