With Ruhnn Private, Uncertainty Looms for Chinese Firms?

The slew of Chinese delistings continues.
CapitalWatch StaffApr 23,2021,15:30

This week, another Chinese company was taken private by its founders – Ruhnn Holding Ltd. The struggling e-commerce platform ceased to be publicly traded on Tuesday after months of preparations.

Ruhnn’s history as a U.S.-listed firm was just two years long: The company debuted on Times Square in April 2019, raising $125 million for shares priced at $12.50 apiece. Its trading run was troublesome. Soon after the IPO, U.S. investors’ rights litigators went after the online fashion retailer for allegedly misleading shareholders in its filings as to the nature of its KOL operations.

In 2020, Ruhnn became involved in another public scandal. Ruhnn’s largest backer, Chinese e-commerce giant Alibaba Group (NYSE: BABA; HKEX: 9988), demoted its youngest partner, Fan Jiang, after an alleged affair with the co-founder of Ruhnn. Reportedly, Jiang was regarded as a potential successor to the position of Alibaba’s CEO, held by chairman Daniel Zhang.

Ruhnn sells fashion and lifestyle products to consumers through its key opinion leader (KOL) online stores. In its latest financial report, the company posted a 25% increase in revenue, at $69.2 million, in the third quarter of 2020. Income declined 30% year-over-year to $1.5 million, the report said.

The stock in the company has mostly been sliding since March 2020. Prior to the Covid-19 outbreak, RUHN shares reached as high as $8.90 per share. For the past 52 weeks, however, the ceiling was $5.10 per share and the low was $2.26. Its average trading volume has been about 235,000 and its market cap sat at about $280 million ahead of the privatization deal.

On Tuesday, the troubled company was taken private through a merger at $3.50 per share. Founders of Ruhnn, Min Feng, Lei Sun, and Chao Shen, have pursued privatization since November 2020, initially proposing to buy back the company at $3.40 per share.

Ruhnn was the second Chinese company to delist from the Nasdaq this week. On the same day Ruhnn delisted, China Biologic Products Holdings, Inc. (Nasdaq: CBPO) suspended its trading after a privatization deal at $120 per share by a consortium of investors including its chairman, Josph Chow, and Temasek Holdings.

A month ago, China’s internet giant Sina discontinued its public trading after 21 years on Nasdaq. Sina was taken private by New Wave Holdings Ltd., an entity controlled by Sina’s chairman Charles Chao, at a valuation of $43.30 per share, or $2.6 billion

Topics:ruhn, ruhnn, alibaba, baba, cbpo, china biologic