Fangdd Prepares Nasdaq Listing, Targets $86.5 Million

China online real estate service platform Fangdd Network Group Ltd. has submitted an updated prospectus to the U.S. Securities and Exchange Commission on Oct. 24. The company expects to sell 7 million American depositary shares priced at between $13 and $15 each. According to the filing, each ADS represents 25 shares of Class A common stock.

Fangdd aims to become the first publicly listed industry internet SaaS company in China. According to the filing, the platform expects to be publicly traded on the Nasdaq Global Market under the ticker symbol "DUO." The company said it estimates to receive net proceeds of approximately $86.5 million from its public offering.

The company said 40% of the net proceeds will be used to enhance its research and product development capabilities and 20% of the net proceeds to invest in sales, marketing and branding. The rest of the net proceeds will be allocated for working capital and general corporate purposes, including funding potential investments and acquisitions of complementary businesses, assets and technologies.

The main source of income for Fangdd is the basic commission from transactions, income of innovation initiatives and other value-added services. According to the prospectus, just in 2019, Fangdd's revenue increased by 55.4% compared with the same period in previous year with 1.6 billion yuan ($233.7 million) in revenue as of June 30, 2019. Its revenue increased by 21.9% from 1.5 billion yuan in 2016 to 1.8 billion yuan in 2017, and further by 26.9% to 2.3 billion yuan ($332.4 million) in 2018.

The company had a net income of 100.3 million yuan ($14.6 million) in the six months ended June 30, 2019, increased by 166.6% from 37.6 million yuan in the six months ended June 30, 2018.

“We have a limited operating history, have experienced rapid growth in recent periods, and may not develop or continue to grow as expected,” the company said in the filing.

As the company expands its operations, it expects its operating costs and expenses to increase in the future, the company said. Fangdd plans to devote substantial financial resources to further strengthen and expand its business, including product development, sales and marketing, technology infrastructure and strategic opportunities that may not result in increased revenue or growth in its business. “If we fail to continue to grow our revenue at a greater rate than our costs and expenses, we may continue to incur significant losses in the future and not be able to achieve or maintain profitability,” the company said in the prospectus.

In terms of liabilities, Fangdd's total liabilities in 2016, 2017 and 2018 were 1.090 billion yuan, 2.091 billion yuan and 2 billion yuan respectively; as of the first half of 2019, the total liabilities of Fangdd were 2.308 billion yuan.

The latest prospectus shows that Duan Yi, the company's largest shareholder, held a stake of 19.8% in the company before the initial public offering and it will lower to 17.9%, which represents 44.4% of the voting rights. The second largest shareholder, Zeng Xi’s shareholding ratio will change from 9.7% to 8.8% with 21.8% voting rights.

According to data from Frost & Sullivan, as of December 31, 2018, Fangdd operated the biggest SaaS-powered online real estate transaction marketplace in China. 

At the end of 2018, the company said its platform was used by 911,000 of China's 2 million real estate agents with a penetration rate of over 45%.