Tencent, Alibaba-backed industrial products e-commerce platform operator ZKH gets Beijing’s nod for US IPO

  • Shanghai-based ZKH aims to raise US$300 million to US$500 million from its public listing in the US
  • The company describes itself as the Amazon for industrial maintenance, repair and operations products

ZKH Industrial Supply (Shanghai) Co, operator of an e-commerce platform for industrial products, has been given the green light by Beijing to proceed with its initial public offering in the United States, according to China’s state media, after mainland authorities signalled a new approach to end the long-standing stalemate with the US over corporate audits.

The China Securities Regulatory Commission (CSRC) said in an online meeting with some US-listed Chinese firms on Sunday that it has “no objection” to the IPO plans of ZKH, assuring that overseas listing for mainland companies remains a “smooth” process, according to a report by China Securities Journal on the same day.

ZKH would be among the first batch of Chinese technology firms to resume plans to float their shares in the US, after ride-hailing giant Didi Chuxing’s IPO in the New York Stock Exchange in June last year. Days after its listing, Didi was put under a cybersecurity investigation. By December, Didi started its move to delist in the US.

Founded in Shanghai in 1998, ZKH aims to raise US$300 million to US$500 million from its public listing, according to a Bloomberg report earlier this month. China Renaissance Holdings and Goldman Sachs are helping ZKH with its IPO.

A screenshot of ZKH Industrial Supply (Shanghai) Co’s website.

 

ZKH transformed into an e-commerce marketplace for industrial maintenance, repair and operations products in 2014, after initially operating as a sales agent for chemical products, including industrial adhesives and lubricants.

As the self-described Amazon for industrial products, ZKH said it has established a transparent and low-cost online marketplace for business-to-business transactions. Its digital procurement system was designed to help drive digital transformation in the country’s manufacturing sector, according to the company.

In October 2020, ZKH raised US$315 million from its Series E funding, which the company described as the largest single round of financing in China’s industrial supplies sector. That round was led by Yunfeng Capital, a Shanghai-based private equity firm co-founded by Alibaba Group Holding founder Jack Ma in 2010. Alibaba is the parent of the South China Morning Post.

ZKH raised US$160 million in June 2019 from a group of investors led by Tencent Investment. This investment arm of internet giant Tencent Holdings holds a 25 per cent stake in ZKH.

ZKH Industrial Supply (Shanghai) Co’s main offices

 

The CSRC’s go-ahead for ZKH to list in the US signals that the eight-month-long IPO freeze for Chinese tech firms could soon come to an end.

Last month, Chinese disposable medical devices maker Meihua International Medical Technologies became the first mainland company to list in the US since Beijing’s regulatory crackdown put IPO plans in limbo.

It has been a bumpy road for Chinese tech firms’ IPO plans over the past year amid the uncertainty caused by the regulatory crackdown and the stalemate with the US over corporate audits.

The CSRC is considering a new approach that grants the US Public Company Accounting Oversight Board access to the audit papers of China-based companies after these are cleared by the Chinese finance ministry for state secrets or sensitive data such as personal identity numbers, according to a Post report last week that cited two sources familiar with the plan.

Both Chinese and US regulators are fully aware of each other’s concerns, and are moving towards an effective and sustainable cooperation “as soon as possible”, according to China Securities Journal’s report on Sunday, citing a source close to the regulators.

Author: Jiaxing Li, SCMP

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