Daojia Ltd. seeks to join the Chinese home service providers publicly traded in New York, having filed last week to sell its American depositary shares on the New York Stock Exchange.
In a letter opening the prospectus, founder, chairman, and CEO Xiaohua Chen positioned Daojia as a company that looks to provide respectable work opportunities to females from rural areas, as well as the transparency and trust sought by the households in need of help. Chen noted that Daojia has trained over 1 million service providers in the past three years and facilitated over $3 billion worth jobs.
In terms of GMV, Daojia claims to be the largest home services provider in China, as supported by iResearch. It also said it helped deliver home services to the largest number of consumers – as of March, it counted 4.2 million cumulative transacting users.
In 2020, Daojia saw a 4% decline in gross transaction volume due to the impact of Covid-19 but revenue increased by 16% year-over-year to $108.5 million. In the first quarter of 2021, volume increased by 57% to $256.4 million and revenue grew 38% to $30.1 million compared with the first quarter of 2020. Losses were $93.8 million for the full year 2020 and $22 million in the three months through March.
The home services market in China is highly fragmented, with many small players including 630,000 agencies and over 30 million individual providers. According to iResearch, the household expenditure on home services is expected to grow at a compound annual growth rate of 18.5% to reach 2.1 trillion yuan by 2025.
CEO Chen has held management roles at China's largest platform for classifieds, 58.com, formerly traded on Wall Street under "WUBA." 58.com and Alibaba Group's Taobao are among principal shareholders in Daojia. Serving on the board of Daojia are managers from 58.com, Alibaba Group (NYSE: BABA; HKEX: 9988), Sequoia Capital, and former acting CFO of NetEase, Inc. (Nasdaq: NTES; HKEX: 9999), among other notable figures.
The company has hired J.P. Morgan, UBS Investment Bank, and CICC to secure its IPO. Daojia expects to trade under the ticker symbol "JIA." The pricing terms and the size of the deal have yet to be announced. According to an April report by Bloomberg, Daojia would seek valuation of about $3 billion at IPO.
Daojia would follow rival E-Home Household Service Holdings Ltd. (Nasdaq: EJH) to New York trading. E-Home completed its $25.2 million IPO in mid-May. EJH priced at $4.50 a share and skyrocketed on Day One to $54 per share before tumbling over the next few days to under $30 apiece. Today, EJH trades at $25.54 per ADS and has an average trading volume of 185,680 – still significantly above IPO pricing but showing a downward trend overall and low activity.
To compare, E-Home has shown a slight profit – for fiscal 2020, the company reported $46.2 million in revenue on $5.6 million in income. For the first half of fiscal 2021, it reported 40% revenue growth to $44.1 million on income of $8.9 million.
A larger company than E-Home, will Daojia force its way into American investors' hearts despite the recent volatility in Chinese U.S.-listed stocks?