Consumer Discretionary Author: Qasim Khan May 20, 2021 03:27 PM (GMT+8)

The Chinese K12 online education firm officially submitted a prospectus to the US Securities and Exchange Commission, planning to list on the New York Stock Exchange.

IPO

The first Chinese online one-on-one education stock is said to be backed by Morgan Stanley, Credit Suisse, Citigroup and CICC as its underwriters.

According to the prospectus submitted, in 2019, Zhangmen's revenue was CNY 2.66 billion, increasing by 50.6%  year-on-year in 2020 to CNY 4 billion. As of Q1 2021, its revenue reached CNY 1.34 billion, up about 20% year-on-year. It also stated that the number of paying students reached 544,800 in 2020. 

The company's main source of income seems to be coming from the one-to-one business as according to the prospectus in 2019, 2020 and the three months ending March 31, 2021, its net income from the segment accounted for 94%, 93.1% and 87.3%, respectively.

In terms of expenditures, the total operating expenses of Zhangmen increased from CNY 2.6 billion in 2019 to CNY 3.1 billion in 2020.  respectively. As of Q1 2020, the total operating expenses were CNY 1.12 billion, an increase of 94.3% year-on-year. In addition, the research and development expenses in 2019 and 2020 were CNY 237.3 million and CNY 317.9 million respectively. 

According to market research firm Holon IQ, since the epidemic, the huge flow of online education has been favored by capital and the total amount of financing has reached USD 16.1 billion globally. With that being said we believe more and more online education companies will be eyeing an IPO in the near future.