The IPO Buzz: China’s ZKH Group (ZKH) Prices IPO at $15.50 – Low End

ZKH Group Ltd. (ZKH), the parent of a Chinese MRO procurement services platform business, priced its IPO at $15.50 – the low end of its $15.50-to-$17.50 range – on Thursday night (Dec. 14, 2023). ZKH Group raised $62.0 million in its IPO by pricing 4.0 million American Depositary Shares (ADS) – the number of shares in the prospectus – at $15.50 each. Each ADS represents 35 ordinary shares.

ZKH Group’s stock opened flat at $15.50 this morning – Friday, Dec. 15, 2023 – on the New York Stock Exchange. The stock later slipped to break issue price, dropping to a session low at $15.00, on fairly light volume. ZKH briefly touched a session high at $18.00. By the closing bell, ZKH had come full circle to end flat at $15.50. Volume was about 506,140 shares for the day.

Deutsche Bank, China Renaissance and CICC were the joint book-runners.

Insiders had indicated interest in buying an aggregate of up to $15.0 million of stock in the IPO, or about 24 percent of the deal, based on the $15.50 IPO price. The prospectus identified those insiders as two shareholders. The Canadian Pension Plan Investment Board was in for up to $10.0 million. Tencent Mobility Limited was in for up to $5.0 million.

ZKH Group Ltd. is the Cayman Islands parent of a Chinese business that offers MRO procurement services through two platforms – ZKH for enterprise customers and GBB for micro businesses. The company, founded in 1998, also provides its platform services through its mobile app, Weixin Mini-Program.

“MRO” stands for “maintenance, repair and operation” and refers to materials used for “maintenance, repair and operation purposes that do not directly constitute final products,” the prospectus says.

ZKH Group’s operating business, based in Shanghai, provides a digital procurement network to supply its 64,000 industrial customers with spare parts, chemicals, manufacturing parts, general consumables and office supplies, according to the prospectus.  ZKH Group supports its digital network with 30 distribution centers, 96 transit warehouses and 4,000 smart vending machines. The company’s inventory covers 32 product lines, 17.2 million SKUs and 24,000-plus suppliers.

ZKH Group is not profitable. For the 12 months that ended Sept. 30, 2023, the company reported a net loss of $56.18 million on revenue of $1.21 billion, according to financial statements in the prospectus.

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