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Tencent's Fashion Platform Mogu Seeks $200 Million IPO

The offering was downsized from the $500 million the Chinese fashion platform was said to be seeking previously.

Anna Vodopyanova
    Nov 09, 2018 6:28 PM  PT
Tencent's Fashion Platform Mogu Seeks $200 Million IPO

Mogu Inc., a Hangzhou fashion and lifestyle platform backed by Tencent Holdings Ltd. (HKEX: 0700), is seeking to raise $200 million in an initial public offering in New York.

With a mission to make fashion "accessible," Mogu, which changed its name from Meili Inc. this month, aims to make shopping enjoyable for China's young generation.

In its prospectus filed Friday with the U.S. Securities and Exchange Commission, the company stated: "People shop not only to buy, but also for leisure, entertainment and to stay informed of the latest trends." Its platform, it said, is an interactive community that helps its users immerse in fashion and purchase apparel from Mogu's merchants and brand partners.

Mogu's marketplace features content from fashion influencers, including live videos, photos, and articles on the latest trends, product reviews, and fashion tips, among other topics. Users access the platform primarily through its mobile app, Mogujie. In addition, the company taps into the massive user base of Tencent, China's gaming and tech giant, through its apps.

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The company said it generates revenue from marketing, as well as commissions from the merchants on transactions facilitated through its platform. In today's filing, it said its gross merchandise volume (GMV) increased 25 percent in the six months through September compared with the same period last year. From March to September, its revenue reached $71.3 million, up 2 percent year-over-year. Net loss during the six months decreased to $81.3 million from $142 million a year ago.

As its growth strategy, Mogu is betting on China's young generation spending increasing time on mobile internet for social interaction, shopping, information, and entertainment. Citing a report by Shanghai iResearch Consulting Co. Ltd., the company said last year, on average, a young person spent 4.8 hours a day on mobile internet. Approximately 20 percent of that time was spent on shopping by females between the ages of 15 and 32, according to the report. Mogujie, the report said, is a well-recognized platform in China among youth.

As to the online fashion marketing, Mogu said, citing iResearch, the expenditure in the sector is expected to grow at a compound annual growth rate (CAGR) of 23 percent from 2017 to 2022. The GMV of China's fashion e-commerce market is estimated to reach more than $1 trillion in 2022, the company said.

The Hong Kong-listed Tencent holds an 18 percent stake in Mogu. Zhaohui Li, the managing partner of Tencent Investment, holds a seat on Mogu's board. The conglomerate has been aggressively expanding its presence in e-commerce. It holds a 20 percent stake in JD.com Inc. (Nasdaq: JD), China's second-largest online retailer. Last year, Tencent and JD invested in Vipshop Holdings Ltd. (NYSE: VIPS), another fashion marketplace.

Another large investor in Mogu is Hillhouse MGJ Holdings Ltd., a unit of Hillhouse Capital Group, an Asia-based investment management firm. Hillhouse holds 10 percent of Mogu, according to today's filing.

The fashion platform's proposed offering in New York has declined significantly from the $500 million the company was said to be targeting in July in a confidential filing, as reported by Caixin Global.

Underwriting the offering are Morgan Stanley & Co. International, Credit Suisse Securities (USA) LLC, and China Renaissance Securities (Hong Kong) Ltd.

Mogu expects to become publicly traded as "MOGU" on the New York Stock Exchange.

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