Chinese EV Dealership Jiuzi Files For IPO
Chinese electric vehicle dealer owner Jiuzi plans to raise money via an IPO to help grow its physical presence and create an online sales platform.
The Offering: Jiuzi is seeking to raise $31 million by listing its shares under the ticker "JZXN" on the NASDAQ. The company said it will use the proceeds for marketing and growing the brand (15% to 20%), franchise store expansion (40% to 50%) and developing an online/offline platform (20% to 30%). A price point was not listed in the company's SEC filing.
Jiuzi's Franchise Model: Jiuzi sells electric vehicles at 18 franchised locations and one company-owned location.
The locations are located in what the filing referred to as third-fourth tier cities. Franchisees pay an initial fee of $575,000. Royalties of 10% of net income are also paid to Jiuzi for the right to franchise the brand.
The franchise model was listed in several areas of the filing, including competitive advantages and growth strategy. The company said its large number of franchisees is an advantage.
The stores also feature larger sales space, with an average of 5,000 to 12,000 square feet. One of Jiuzi's growth strategies is to convert some of the underperforming competitor stores that compete in the 4S market — sales, service, spare parts, services — to a Jiuzi franchise model.
Growth Through Online Sales: The majority of the cars sold by Jiuzi are battery-operated, with some being plug-in vehicles as well.
Jiuzi has relationships with over 20 automotive manufacturers. This list includes BYD, of which which Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK.B) owns 25%, and Geely.
The business model has customers going to locations that offer vehicle selection, price comparisons and test driving.
Jiuzi is developing an online platform that will provide the ability for customers to purchase online and have vehicle delivery and maintenance performed offline.
Jiuzi's Financials: In 2019, Jiuzi had revenue of $7.98 million. This was an 85% increase from the prior year’s $4.31 million. The company shows net income of $3.21 million in fiscal 2019 and $555,000 in 2018.
COVID-19 had a negative impact on the company’s financials for 2020. Most stores were closed from late January through part of March. The first six months of 2020 saw revenue fall to $1.28 million from $4.11 million in the prior year. Net income came in at a loss of $28,000 for the first six months of 2020 compared to $1.38 million in the prior year.
EV Stocks Hot: The stock market has been rewarding to the electric vehicle market. Tesla (NASDAQ: TSLA) shares are up 435%.
Two Chinese electric vehicle makers have also had strong returns since going public in the U.S.
Nio Limited (NYSE: NIO) shares are up 395%. Xpeng Inc (NYSE: XPEV) raised the offering price of their IPO from $13 to $15, with shares trading as high as $25 on Xpeng's first day of trading Thursday.
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