Ninebot Is First Red Chip Firm to Apply for Shanghai Tech Board Listing
Zhang Yuanke
/SOURCE : yicai
Ninebot Is First Red Chip Firm to Apply for Shanghai Tech Board Listing

(Yicai Global) April 19 -- Ninebot has applied to list on Shanghai's Sci-Tech  Innovation Board, making the Cayman Islands-registered smart  transportation equipment maker the first red chip applicant. 

Red chips companies are mainland Chinese firms that are incorporated  outside the country. The purpose of red chips is to go public and gain  financing overseas through foreign shareholding companies.

Ninebot was not only the first overseas-registered company to apply but also  the first that aims to issue Chinese Depository Receipt shares among the  applicants. The Beijing-based firm also uses a Variable Interest  Entities structure, meaning that an investor has a controlling interest despite not having a majority of voting rights.

Red chips were normally required to break the VIE structure when returning  to China's A-share market in the past and become domestic-funded, which  usually comes at a high cost.

"A company needs to pay 10 percent to 25 percent of corporate income tax  just to change from a foreign-funded structure to one that is  domestic-funded," according to an employee from a legal firm that  represents firms going public. "So, any failure to go public on the  A-share market will cost too much and using the CDRs is a much better  option." 

The company's plan shows that the new board can attract firms from the new  economy, Fu Lichun, director at Northeast Securities, told Yicai Global.  "Regulators are still improving supporting laws, regulations and  systems, and returning red chips' will definitely encounter various  difficulties but they will gradually be resolved." 

The domestic capital market has not seen any listing through CDRs, so the  outcome of future trading activity, price decision mechanism, and  investors' interest remain largely uncertain. Ninebot's fate will set an  example for others to follow, he added.

Founded in 2014, Ninebot, produces smart electric Segways, electric scooters and service bots.

Ninebot's shareholders include Sequoia Capital with 16.8 percent. Intel also holds 3.3 percent and China Mobile Innovation Industry Fund, Future  Industry, State Development & Investment are also investors. Shen  Nanpeng, global managing partner at Sequoia, served as a director of the  firm. 

Editor: William Clegg

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Keywords: Red Chip , CDR , Science and Technology Innovation Board , IPO , Shanghai Stock Exchange