Chinese on-demand delivery platform operator Dada Nexus is pushing ahead with its US initial public offering (IPO) despite concerns over its prospects following the Luckin Coffee financial misconduct scandal. The company, which is heavily backed by e-commerce giant JD.com, filed for an IPO on the NASDAQ stock exchange this week.
At the upper range of its IPO pricing, the company could manage to raise up to $500 million during the share sale. If it manages to do that, the IPO could be the largest one by a Chinese firm this year. The IPO is scheduled to launch later this year, with the company stating that it will be using the funds for further research and development and in investments in new technologies. According to its filing with the Securities and Exchange Commission, Dada Nexus' IPO will be underwritten by Goldman Sachs, Jefferies, and BofA Securities.
JD.com took partial control of the company after it merged its JD Daojia unit with Dada Nexus and injected more than $200 million in cash in the business more than four years ago. JD currently holds a 47 stake in the company. In 2018, JD injected a further $180 million into the company, purchasing additional preferred shares.
In China, Dada Nexus operates through several platforms, including JD Daojia's on-demand retail service and its Dada Now crowdsourced delivery platform. Similar to other unicorn startups, the company remains to be unprofitable as it has yet to report an annual profit since it was founded back in 2014. However, the company's revenues have continually grown over the years. For its first quarter this year, the company reported revenues of around 1.1 billion yuan, or roughly $155 million, more than double its revenues over the same period last year.
Its continued partnerships with JD and other firms have managed to increase its earnings. For its first quarter this year, around 37.8 percent of its revenues came from the services it provided to JD, while 14.9 percent came from its services to Walmart China.
Dada Nexus' IPO filing comes just days after another Chinese firm, Kingsoft Cloud, had launched its IPO in the US. The cloud-storage unit of Kingsoft Corp managed to successfully hit its targets, with its shares now trading up by more than 43 percent. As of Tuesday, Kingsoft Cloud's shares closed at $24.35 per share.
The launch of the IPO and Dada Nexus' plans to push ahead with its share sale comes as tensions between China and the US intensifies due to the pandemic and the recent discovery of Luckin Coffee's financial misconduct. Scrutiny on Chinese companies wishing to list in the US has increased with regulators now tightening their vetting processes.
