Investors are closely watching the IPO of Meituan-Dianping, one of the biggest financial events to hit Asian finance in recent months. The Chinese internet startup, which is popular among customers with its host of online services, is reportedly aiming to raise funds by as much as $4.5 billion and elevate the company's valuation to around $55 billion. However, some industry watchers are worried that the valuation might be too high especially considering reports that have recently surfaced.
Meituan's $55 Billion Target
Meituan-Dianping is certainly aiming high in its upcoming Hong Kong IPO later this week. The Beijing-based online firm is reported to be planning to raise as much as $4.5 billion, according to a report by The Wall Street Journal.
Meituan will offer its shares at a price range of US$7.64 to US$9.17 or 60 to 70 Hong Kong dollars, according to the publication. This would mean that, at the low end of the range, Meituan would be valued at US$45.5 billion. On the other hand, the company's could skyrocket to around $55 billion, if the company successfully sells its shares at the high end of the range.
Increasing its market valuation to $55 billion is an astonishing feat for Meituan as it would mean that it almost doubled its value in less than a year. In October 2017, the company was just valued at $30 billion during its Tencent-led Series C round of fundraising where it raised $4 billion, according to a TechCrunch report.
Concerns About Meituan's Valuation
Investors are also interested to see just how the Meituan-Dianping's IPO would pan out since it has been months since an IPO of this magnitude occurred. In July 2018, another Chinese firm, the smartphone manufacturer smartphone maker Xiaomi Corp also listed on the market where it was valued at US$54 billion based on its IPO price. Since then, Xiaomi shares have slightly dropped at the firm is now valued slightly lower at US$52.7 billion.
However, there are some concerns that Meituan's target valuation of $55 billion might be a bit too high and many investors fear that its listing might suffer a similar fate to Xiaomi's July IPO. Originally, Xiaomi was gunning for a $100 billion valuation but it had to eventually settle for a valuation at half its original target.
Some of the possible issues that could hinder Meituan from reaching its $55-billion target, according to TechCrunch, is the company's net losses. In addition, Meituan is said to be facing increased competition from another Chinese online giant, Jack Ma's Alibaba.
