Mainland Apartment Platform Danke Aims for $175M NYSE IPO

Loss-making mainland China apartment rental operator Danke has moved a step closer to listing on the New York Stock Exchange, just two months after Shanghai-based rival Qingke listed on the NASDAQ at the bottom end of its price range.

The Beijing-based firm issued an F1/A amendment form on 8 January indicating a maximum offering of $175 million, with the company set to go public on 16 January, according to the NYSE website.

The US listing for the venture capital-backed apartment platform comes as Qingke, which was the first ever mainland China apartment rental operator to list in the US, has lost a third of its value since listing at the beginning of November, falling from $17.64 on 7 November to $11.80 at the close of trading on 9 January.

Gaining Commitments from Investors

Lodged by parent company Phoenix Tree Holdings, Danke’s fresh paperwork gives a price range of $14.50 to $16.50 for a total of 10,600,000 American Depository Shares to be issued under the ticker tape symbol DNK.

Danke’s move to list comes after a financing round in October raised $190 million from Beijing-based investment firms Primavera Capital Group and CMC Capital Group. That series D round followed six months after the firm closed on $500 million in financing co-led by private equity titan Tiger Global Management and Jack Ma-controlled asset management firm Ant Financial.

The amended prospectus shows that Chinese online brokerage Tiger Brokers has been added to the group of bookrunners for the impending IPO, which includes Citigroup, Credit Suisse, and JP Morgan.

At the top of the price range, Danke could raise up to $175 million from the offering, with an over-allotment option giving the bookrunners a 30 day option to purchase up to 1.59 million additional American depository shares worth $26 million at the top end of the price range.

Danke has noted in its amendment documentation that some of the company’s principal shareholders have indicated an interest in purchasing $55 million of the ADSs being offered, while a separate investor has demonstrated an interest in purchasing $60 million of the ADSs.

The company’s principal investors include Chase Coleman’s Tiger Global with a 20 percent stake, Luckin Coffee backers Joy Capital with 15 percent, and CMC Capital with 9 percent. Ant Financial holds an 8 percent stake in the company.

Chasing Growth as Capital Drains Away

The housing rental platform, which slices up existing homes leased from condo owners into dorm-like apartments that it markets to young professionals, intends to use the funds from the proposed IPO to scale up its operations and upgrade its existing stock.

It has pursued a fast-paced expansion plan in the five years since it opened for business, building up a portfolio of 433,000 rooms under management, with listings in 13 mainland cities including Beijing, Shenzhen, Shanghai, Hangzhou, Tianjin, Wuhan.

In the three months since the company lodged its original paperwork for the IPO, the company has boosted its room count by over 25,000.

Pursuing its expansion plans resulted in a net loss of nearly RMB 1.4 billion ($200 million) in 2018, a four-fold increase on the RMB 272 million net loss recorded in 2017.

The company has been digging into debt even more quickly in 2019 with losses for the first three quarters of the year totalling RMB 2.5 billion — already 44 percent more than its 2018 full-year total.

Qingke Struggles on the NASDAQ

Since Qingke listined on the NASDAQ in November, the loss-making apartment manager has struggled to win investor confidence.

The November IPO priced the shares, listed under the ticker symbol QK, at the bottom of the $17 to $19 price range indicated in its IPO prospectus.

Despite the low-end pricing, investors scooped up less than half of the 5.2 million ADSs offered, with the Morgan Stanley-backed firm raising $46 million — less than half of its $100 million target.