Chinese SaaS-based Online Property Marketplace Fangdd Files For US IPO

Fangdd Network Group Ltd., a Chinese software as a service (SaaS)-enabled online real estate marketplace, has filed for an initial public offering (IPO) in the United States.

The company listed the size of the offering at $150 million, a placeholder amount likely to change, according to a filing with the US Securities and Exchange Commission. The company plans to float its shares on the Nasdaq Global Market under the symbol “DUO.”

Morgan Stanley, Citigroup, UBS, China International Capital Corporation (CICC) and AMTD are the joint bookrunners of the deal.

The listing plan is being carried out more than five years after Fangdd incorporated its variable interest entity (VIE) in March 2014 – a measure that enables Chinese domestic entities to list offshore on international capital markets.

The long-awaited IPO comes as the residential property market size in China is expected to reach 33.4 trillion yuan ($4.6 trillion) in 2023, rising at a compound annual growth rate (CAGR) of 9.2% from 2018, according to Frost & Sullivan.

Fangdd is developing in China’s growing residential property market in fierce competition with domestic players like Lianjia, New York-listed Fang Holdings Limited, 58.com, and Ke.com. The company, specialized in serving real estate agents, recorded over 911,000 registered real estate agents of the approximately two million agents in China as of December 31, 2018, representing a penetration rate of over 45%, according to Frost & Sullivan.

“Agents have difficulties in building brands in crowded local markets, connecting potential clients, and differentiating their qualifications and listings. Furthermore, listing information online is often inaccurate, making it difficult for real estate buyers to find reliable information or trustworthy real estate professionals,” said Fangdd in the prospectus.

Targeting to solve these problems, Fangdd was founded in October 2011 to leverage mobile internet, cloud and big data to offer SaaS-based solutions that help real estate agents connect with their essential business resources, including customers, property listings, capital and transaction data.

The company built a suite of modular SaaS products and services to simplify traditionally cumbersome processes in real estate transactions, including a smart matching system, which allows agents to access business intelligence tools to analyze data and optimize the running and management of their businesses.

The main revenue sources of the Shenzhen-based company include revenue from base commission from transactions, and revenue from innovation initiatives and other value-added services. Its revenue increased by 26.9% from 1.8 billion yuan in 2017 to 2.3 billion yuan ($332.4 million) in 2018. The revenue also grew by 55.4% from 1.0 billion yuan in the six months ended June 30, 2018 to 1.6 billion yuan ($233.7 million) in the six months ended June 30, 2019, according to the prospectus.

The company recorded a net income of 0.6 million yuan in 2017 and 104.0 million yuan (US$15.2 million) in 2018, compared to a net loss of 332.1 million yuan in 2016.

In September 2015, Fangdd announced the completion of a $223 million Series C round from Chinese private equity firm Fountainvest Partners to reach a unicorn valuation of $1.013 billion. The company secured $80 million in a Series B round from a group of Chinese investment firms including Vision Knight Capital China Fund, Lightspeed China Partners, and CDH Ventures in July 2014.

The company also closed 60 million yuan ($8.3 million) in a Series A round in July 2013, after the firm raised 6 million yuan ($839,520) in an angel round in September 2012.