Car House Files for U.S. IPO
The Chinese auto perfume maker seeks a listing of up to $33 million in New York, just meeting new requirements.
Car House Holding Co. Ltd. seeks to become publicly traded on the Nasdaq Capital Market and raise up to $33.2 million from U.S. investors, just exceeding the market's proposed minimum IPO value.
Based in Dongguan, Guangdong province, Car House operates an online marketplace selling automotive parts and air fresheners for cars. It facilitates sales for third-party merchants and sells its own products, including car perfume under the brand Carori.
Car House said about 3,100 domestic and international merchants were using its platform. In the six months through December, its GMV was $65 million – up 41% year-over-year. Clients of the platform include wholesale retailers, car dealers, car care and detailing shops, and private car owners. It currently services 180,000 registered wholesale clients, according to the filing.
First a manufacturer of car air fresheners, Car House has been operating since 2004. In addition to its own platform, Car House sells on China's largest e-commerce platforms including JD.com and Alibaba's Tmall and Taobao. In November 2018, Car House became the exclusive distributor of Autobacs Seven (China) Car Accessories Trading Co. Ltd. The company also owns an auto beauty shop.
For the second half of 2019, Car House posted a revenue increase of 34% to $16.8 million, of which 88.4% was generated from product sales, while 11% was generated from commissions and fees paid by merchants, and 0.6% from the auto shop. Net income in the six month period was $1.6 million.
For the 12 months through June 2019, the company had revenue of $31 million, up 27% year-over-year, and income of $4.4 million.
Car House said it launched new products in February 2020 to mitigate the negative impact of the Covid-19 outbreak. It also claims it does not expect a significant hit on its operations and financial performance.
Among the risks noted in its prospectus, the company may face delisting if the bill to subject Chinese listings to PCAOB standards, currently reviewed by U.S. Congress, is implemented.
In the prospectus, Car House's auditor wrote: "We conducted our audits in accordance with the standards of the PCAOB. […] Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion."
Car House plans to use the proceeds from its IPO "for data analysis and operation capacity improvement of our e-commerce platform, marketing, upgrading automotive product manufacturing plant and equipment and other general and administrative matters."
Underwriting the deal is Network 1 Financial Securities Inc.
Car House has applied to trade its ordinary shares under the ticker symbol "CARH."
We shall see what happens with the car perfume company. But even the mention of a possible delisting from failing to meet PCAOB standards may give off a bad scent to increasingly Sino-skeptical investors.