The IPO Buzz: QuantaSing (QSG) IPO Ends Almost Flat After Early Pop in its NASDAQ Debut

China’s QuantaSing Group Limited (QSG) ended its first day of trading about where it started – at $12.52, up just 2 cents from its IPO price – in its NASDAQ debut. That was a quiet finish after a showy start. QuantaSing shot up 9.6 percent to $13.70 – up $1.20 from its $12.50 IPO price – when the American Depositary Shares (ADS) started trading at 11:14 a.m. EST today (Wednesday, Jan. 25, 2023) on the NASDAQ. QuantaSing’s ADS lost altitude fairly quickly, though, to trade at $12.70 at around 11:30 a.m. EST today. QuantaSing is the first U.S. IPO from a Chinese company this year. QuantaSing, known in China for its online financial literacy courses for adults, went public during the first week of the Chinese New Year. This is the Year of the Rabbit, a symbol of longevity, peace and prosperity in Chinese culture. 

QuantaSing, China’s largest online adult education company, priced its U.S. IPO at $12.50 – the mid-point of its $11.50-to-$13.50 range – on 3.25 million ADS on Tuesday night (Jan. 24, 2023). The IPO raised $40.63 million. The pricing – in sync with the terms in the prospectus – was delayed from last week.

China watchers point out that QuantaSing filed to go public in late December “just days after the U.S. securities watchdog’s accounting arm gave a positive review to its first tests of a new deal giving it access to China-based auditors of U.S.-listed Chinese firms,” Bamboo Works reported. That positive review from the U.S. Public Company Accounting Oversight Board (PCAOB) indicated that the risk of the U.S. delisting Chinese companies listed in New York had been avoided, according to Bamboo Works. QuantaSing’s IPO filing “seems to confirm the big investment banks also see it that way, ending a pause to their new IPO sponsorships dating back to the summer of 2021,” according to the Jan. 17, 2023, story by Doug Young, a co-founder and editor-in-chief of Bamboo Works.

Citigroup and CICC were the lead joint book-runners of QuantaSing’s IPO. US Tiger Securities, Inc., CLSA Limited, and Univest Securities LLC served as co-managers.

The ADS were issued by QuantaSing’s Cayman Islands holding company and not by the underlying business, based in  Beijing. Each ADS represents three ordinary shares.

Insider and anchor investors had indications of interest for up to $15.0 million – or about 37 percent – of the IPO, according to the prospectus.

QuantaSing specializes in providing online financial literacy courses to adults in China, along with classes in other topics for their personal development. The company says it has market share of about 37 percent, based on 2021 revenue, according to a Frost & Sullivan report. QuantaSing also provides enterprise customers with online talent assessment, training and learning services for internal employee management.

As of Nov. 30, 2022, QuantaSing had about 75.1 million registered users, quadrupling from 17.0 million as of June 30, 2021.

For the fiscal year ended June 30, 2022, QuantaSing had about 1.1 million paying learners, representing a 37.5% increase from 0.8 million for the fiscal year ended June 30, 2021.

QuantaSing, however, is not profitable. For the fiscal year that ended June 30, 2022, QuantaSing reported a net loss of US$32.8 million on revenue of US $403.2 million.

After QuantaSing launched its IPO this month, the bromance between Chinese companies and big U.S. investment banks heated up again. China’s Hesai Group (HSAI proposed) filed plans last week to go public in the U.S. Goldman Sachs and Morgan Stanley are leading its joint book-runners’ team.

Stay tuned.

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