Credit Suisse, Citigroup, BOA Abandon Ucommune IPO

Credit Suisse, Citigroup and BOA dropped Ucommune’s IPO

It has only been a few days since China’s largest co-working operator officially filed a prospectus for its US IPO, but Ucommune’s debut on the New York Stock Exchange is already said to be facing opposition from its own bankers over its target valuation.

Credit Suisse and Citigroup are said to have defected from the Beijing-based firm’s stock sale over concerns regarding Ucommune’s reported valuation goal of $2.6 billion, according to a report by Reuters citing people with direct knowledge of the matter. A separate account by Bloomberg reported that Bank of America, which is said to earlier have staked out a minor role in the deal, had also withdrawn from underwriting the sale of American Depositary Shares (ADS).

None of the international financial giants appeared on the Form D that Ucommune filed with the Securities and Exchange Commission on 11 December.

The apparent issues with the shared office provider’s valuation, which was specified with a $100 million amount believed to serve as a placeholder in the draft prospectus, come just over two months after WeWork, which the company once known as UrWork has previously been accused of imitating, was forced to cancel its own IPO after its failed to raise investor interest even at a valuation said to be around 20 percent of its original target.

Ucommune Tries for First All-Chinese IPO Process in the US

The Swiss and US banks had been named as participating in the listing in earlier paperwork filed by Ucommune, with the latest documentation showing Haitong International Securities and investment bank China Renaissance Securities as lead underwriters for the listing, along with other institutions.

Ucommune boss Mao Daqing is facing some challenges with the company’s proposed listing

Haitong and China Renaissance are both Hong Kong-based subsidiaries of mainland China finance firms, with Prime Number Capital and The Core Securities Company Limited, which are also listed as underwriters, similarly Hong Kong-based. The sole US-registered broker included as an underwriter at present, Prime Number Capital, is a boutique investment firm specialising in working with Chinese clients.

Should Ucommune push forward with its IPO efforts with the current team it could be the first company to attempt a US initial public offering without a major Western bank, according to analysts at market data firm Dealogic cited in the Reuters account.

Ucommune Backers Unfamiliar with Haircuts

Ucommune, which earlier this year raised $200 million from pool table manufacturer Beijing Xingpai, is said to have refused to accept warnings that the company’s $2.6 billion target was no longer achievable.

Sources cited by Reuters indicated that the company is now under pressure from investors involved in recent funding rounds to list the company as soon as possible, with Ucommune founder reportedly Mao Daqing gunning for a January listing, which sources told Reuters was overly ambitious.

One year ago Ucommune had also raised $200 million at a reported $3 billion valuation in a series D round led by Hong Kong-based All-Stars Investment and mainland investment bank CEC Capital.

Reports have been circulating since early 2018 of Mao’s plans to take the company public, with the former China Vanke executive said to have shelved plans for a Hong Kong listing in the third quarter of last year due to market uncertainty

The mainland co-working player’s decision to plunge into a listing so soon after investors rebuffed WeWork’s IPO raised eyebrows among analysts, but Ucommune was reported by the Financial Times as claiming that it had “monetised the business better than WeWork”.

Another Loss-Making Business Hopes to Float

With 200 locations across 37 cities including New York and Singapore, Ucommune has concentrated more of its offering on hot-desking where members at its Shanghai centres pay between RMB 1,200 and 2,800 per desk per month.

By comparison, WeWork has focused more on private offices with prices per desk in China ranging from RMB 3,500 to RMB 8,500 per month depending on location. Like WeWork, Ucommune has yet to reach profitability.