Smart Share Global's Lawsuits Surface Ahead of IPO

A Shanghai VC firm claims the operator of Energy Monster owes it 3% of a controlled entity.
CapitalWatch StaffMar 29,2021,21:41

Ownership disputes at China’s largest power bank sharing company Smart Share Global Ltd. have surfaced soon after the company filed for an initial public offering in New York that could be worth $300 million.

The operator of Energy Monster is stuck in dispute between its chief executive Mars Guangyuan Cai and Atom Venture Capital’s Yiming Feng and Sicheng Yin. The two Shanghai-based venture capitalists claim Cai owes them a 3% stake in Shanghai Zhixiang Technology Co. Ltd., controlled by Smart Share Global. As Reuters reported, Feng and Yin argue they had an agreement on which Cai had reneged.

Smart Share Global filed for an IPO in mid-March. In its prospectus, the company wrote that Cai’s litigation counsel “has advised him in its written legal opinion that the plaintiffs' claims are baseless and frivolous, and Mr. Cai intends to defend the plaintiffs' claims vigorously.”

The company continued on to say, “If the plaintiffs are successful in pursuing their claims, especially if we become liable as a result of these proceedings, the possible range of loss to our VIE and our business in general would be difficult to assess.”

The IPO proceedings led Feng and Yin to ramp up their efforts against the company. Last week, the two VCs were granted discovery – documents related to the 3% stake deal they can now obtain from banks securing the IPO. These are Goldman Sachs (Asia) LLC, Citigroup Global Markets Inc., China Renaissance Securities (Hong Kong) Ltd., and BOCI Asia Ltd.

The operator of Energy Monster, backed by Alibaba Group, Softbank, and Hillhouse Capital, said in its filing that it was the largest mobile device charging provider in China in terms of revenue in 2020. Last year, it booked $430.6 million in revenue on income of $11.6 million.

Smart Share was spearheading toward IPO before the fate of U.S.-listed Chinese companies came under threat yet again. Last week, the Securities and Exchange Commission adopted the Holding Foreign Companies Accountable Act, aimed to force foreign firms to open their books to local auditing and disclose any ties to the Chinese government. The move wiped out billions of market value of U.S.-traded Chinese companies.

Now, things are heating up even more as skeletons come out of the closet.

Topics:smart share, energy monster, China, IPO