initial public offerings (IPOs) trading on American exchanges

Friday, September 22, 2017

Secoo (SECO) started trading on the Nasdaq on 22 Sept 2017

Secoo prices its IPO of 8,500,000 American depositary shares at a price to the public of $13.00/ADS vs. expected range of $11.50-13.50, for a total offering size of approx. $110.50 mln

WASHINGTON, Sept 21 (Reuters Breakingviews) - A Chinese e-commerce startup is sitting in the lap of IPO luxury. Secoo has carved out a niche for itself in a cutthroat market, selling upscale brands such as Tod's and Versace. Though it's burning cash, the American depository shares on offer have a certain allure.
Secoo's customer base is smaller. Despite boasting some 15 million registered users, only 200,000 of them made at least one purchase during the first half of 2017. Yoox counted more than 3 million.
The Chinese firm nevertheless has its advantages. For one thing, Secoo customers aren't shy about spending. Average sales per order online was $516, more than $100 higher than at Yoox. Secoo also boasts some distinctly local edges. It caters specifically to posh tastes. That distinguishes it from the sprawling wares at larger rivals Alibaba and Secoo also has yet to get tangled up in a counterfeit dispute.
Because Secoo has been losing money, albeit less of it than in previous years, traditional valuation methods are difficult. Based on its mooted price range, it would have a market capitalization of about $650 million. That's 1.7 times trailing revenue. Yoox trades at 1.3 times, as does $65 billion JD, which is also unprofitable using conventional American accounting guidelines.
In addition to its squeaky-clean image and extravagant clientele, Secoo is in a sweet spot. Consultancy Bain expects the market in which Secoo focuses to be the fastest-growing segment of China's luxury industry in coming years. That's one reason why deeper-pocketed Alibaba and JD are chasing high-end consumers, too.
Jack Ma's$450 billion colossus, however, is plagued by a reputation of having dodgy wares on its sites, which partly explains why only about a fifth of luxury brands are willing to set up shop on its Tmall, according to research outfit L2. JD, meanwhile, needs to reposition its mass-market image. Secoo, therefore, could make a tempting target for either company, and that is just one more reason why its shares may be a premium purchase.

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