Youdao Down 17% Upon Debut at a Shaky Time for China IPOs

Youdao rang the bell on the NYSE Friday, raising $95.2 million in its IPO at a challenging time for Chinese companies.
Anthony RussoOct 25,2019,18:55

Youdao Inc. (NYSE: DAO) failed to impress investors on Friday morning, after ringing the bell on Wall Street, at its initial public offering, as shares tanked 15% at 14.35 per American depositary share.

The stock traded as low $13.50 per ADS on Friday morning, while Youdao raised $95.2 million from its IPO, short of its expected $100.8 million it sought.

The Chinese-based internet company said in a statement today, it offered 5.6 million ADSs, priced at $17 per share. Youdao will also raise an additional $125 million through a private placement of 7.35 million shares, giving it a total of $220.2 million, the report said.  Orbis Investment Management Ltd., will manage the private funds.

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Underwriters were given the option to purchase an additional aggregate of 840,000 ADSs to cover allotments.

Securing the deal were Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC, joined by China International Capital Corp, Hong Kong Securities Ltd., Tiger Brokers (NZ) Limited and HSBC Securities (USA) Inc.

Founded in 2006, and operating as a subsidiary for NetEase, Inc., (Nasdaq: NTES) Youdao provides online knowledge tools, smart devices, online courses and interactive learning apps. Its platform averaged over100 million monthly active users in the first half of 2019.

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Through 2018, Youdao’s revenue nearly doubled to 731.6 million yuan, up 100% year-over-year, the company said a filing earlier this month with the United States Securities and Exchange Commission. However, net loss widened to 209.3 million yuan, compared with 163.9 million yuan, in the prior year.

As Youdao looks ahead, online learning in China is expected to reach 719.8 billion yuan, with a compound annual growth rate (CAGR) of 47.4% from 2018, it said in the filing.

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