Ninebot’s depositary receipts, China’s version of ADRs, double on Shanghai’s Star Market debut

Zhang Shidong
·3-min read

China added another feather in the cap to its more than four decades of financial market reforms with the smashing debut of its newest type of securities on the Shanghai Stock Exchange.

Ninebot’s Chinese depositary receipts (CDRs) surged 103 per cent to 38.5 yuan on the Star Market at the closing of trading on Thursday. About 1.6 billion yuan (US$238.6 million) worth of the securities changed hands. There is no limit on how much prices can rise or fall on the exchange’s technology board, compared with a 44 per cent cap for the upside on its main board.

The CDRs rallied while the broader marker weakened following steep losses in Asian markets in tandem with the biggest sell-off in US equities in more than four months.

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China allowed the Ninebot, a smart-scooter maker and owner of Segway, to issue the first-ever CDRs in September, a culmination of years of efforts to broaden the onshore capital market along the liberalisation, or gaige kaifang , initiated by the late paramount leader Deng Xiaoping in 1978.

“Ninebot has an edge over products and channels and its sales are expected to grow fast soon,” said Dong Ruibin, an analyst at China Merchants Securities. “Smart tools for short-distance transport dovetail with China’s policy on energy saving and emission reduction.”

The feat is a precursor to yet another historic milestone as Ant Group, owner of China’s largest online-payment system Alipay, unveiled the world’s biggest-ever stock offering on the way to its debut on the Star Market and Hong Kong on November 5.

Ant Group will begin taking orders from retail investors for the Shanghai leg of its mega offering from Thursday.

Beijing-based Ninebot, raised 1.33 billion yuan from selling 70.4 million CDRs at 18.94 yuan apiece. The offering attracted about 2,500 times more orders than the amount available to investors. Each CDR represents one-tenth of the company’s ordinary shares.

Segway-Ninebot on display at the Consumer Electronics Exchange/Exhibition Centre (CEEC) at the Upper Hills in Futian district, Shenzhen in September 2018. Photo: Roy Issa
Segway-Ninebot on display at the Consumer Electronics Exchange/Exhibition Centre (CEEC) at the Upper Hills in Futian district, Shenzhen in September 2018. Photo: Roy Issa

CDRs allow foreign-incorporated Chinese companies to raise funds from the onshore market. Such businesses typically control their mainland operation through variable interest entities or VIEs. Ninebot is registered in offshore haven Caymans Island. The programme was recently extended to the ChiNext board on the Shenzhen Stock Exchange.

The CDRs are akin to American depositary receipts (ADRs), which enable the likes of Alibaba Group, JD.com and other Chinese companies to raise money extensively from the US capital market. Alibaba is the owner of this newspaper.

Foreign-funded mainland tech firms given nod to sell Chinese depositary receipts on Shenzhen’s ChiNext market

Ninebot is partly-owned by smartphone maker Xiaomi Corp. It plans to use the money to fund an electric-car project, build a research centre and replenish its working capital.

The scooter maker has not made money in each of the past three years through 2019. Its annual loss was 454.8 million yuan last year. The company may have posted a loss of as much as 75 million yuan in the first nine months this year, according to its prospectus.

The firm received more than US$80 million of financing from Xiaomi, Sequoia Capital, Huashan, Shunwei and other investors in October 2014, according to its website. It bought Segway in March 2015, and took US$60 million from investors including Intel and Singapore’s sovereign wealth fund in October 2017.

Additional reporting by Yujing Liu

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