Danke Reduces 25% Fundraising, “Rental Loans” Ratio Hitting 68% at Risk of Collapse
NEW YORK, NY / ACCESSWIRE / January 21, 2020 / On January 17, Danke Apartment, an Internet-based long-term residential rental operator, was listed on the NYSE under the ticker symbol “DNK”. With the successful listing the company has become the second Chinese long-term rental player in the US stock market.
However, on the listing day Danke’s Issue price was US$ 13.5, below the bottom end of its expected price range, and broke and fell to an intraday low of US$ 13 per share. The issue size was also reduced to 9.6 million shares, making the total amount of funds raised decrease by 25% to US$ 149 million.
Danke’s Co-founder and CEO Gao Jing addressed at the bell ringing ceremony that the company had been committed to transforming the traditional housing rental industry with the Internet, and going public was not only a summary of the past-five-year development but also a brand new starting line.
Earlier on January 8 this year, Danke Apartment has submitted an updated prospectus to the US Securities and Exchange Commission (SEC), which will issue 10.6 million American depositary shares (ADS), each ADS representing 10 Class A ordinary shares. The issue price ranges from US$ 14.5 to US$ 16.5, and the maximum amount of IPO funds raised is approximately US $ 201 million.
The updated prospectus shows that the funds raised in the IPO will be mainly used to expand the scale, including the purchase and renovation of additional apartment units; to enhance the company’s technical capabilities; and for general corporate purposes, including brand promotion and marketing, and potential acquisitions and investments.
Founded in 2015, Danke runs the co-living asset management and residential service platform through Ziwutong (Beijing) Asset Management Co., Ltd. “Danke Apartment” also names as its high-end white-collar apartment brand. The company has a registered capital of RMB 10 million, and the legal representative is Gao Jing, the co-founder and CEO.
The prospectus also shows the main business models: Centralization, Standardization and Online Operation. In detail, Danke centrally operates the apartments sourced from property owners and rent them out to its residents. It standardizes the design, renovation and furnishing of its apartment units, and provides high-quality, reliable one-stop services. The entire business process is empowered by technology to enable seamless online experience for both property owners and residents. It is reported that Danke doesn’t have any physical storefront since inception.
The prospectus also shows that as of November 30, 2019, Danke has built up a portfolio of 432,690 apartment units under management with listings in 13 mainland China cities including Beijing, Shenzhen, Shanghai, Hangzhou, Tianjin, Wuhan, Nanjing, Guangzhou, Chengdu, Suzhou, Wuxi, Xi’an and Chongqing.
Data shows that as of November 30, 2019, the occupancy rate of Danke Apartment was 77.9%, a nine-percentage decrease from 86.9% as of September 30, 2019.
Danke currently generates revenues primarily from rents and service charges. Its revenue was RMB 5.712 billion in 10 months ended October 31, 2019, according to the related data.
However, similar to other long-term rental apartment operators, Danke is currently at a loss. The prospectus shows that in October 2019, the net loss of Danke was RMB 296.6 million (US$ 41.5 million), compared with RMB 152.9 million in the same period last year. The company’s net loss for the 10 months ended October 31, 2019 totaled RMB 2.8128 billion.
As of September 30, 2019, the book cash and cash equivalents (including cash, deposits and restricted funds) of Danke Apartment were RMB2.3 billion.
During the year of 2015 and 2019, Danke has made multiple rounds of financing, with the last round before the IPO was submitted. The prospectus shows that the company secured a US$ 190 million Series D round in October 2019, which was led by CMC Capital and Primavera Capital.
In terms of shareholding structure, before the IPO Gao Jing held 14.2% of the shares; Derek Shen, the angel investor and executive chairman of Danke 6.3%; Tiger Global Management, the largest institutional investor 20%; and Ant Financial, the strategic investor 7.8%. After the listing Gao Jing and Derek Shen’s shares will be diluted to 13.4% and 5.9% respectively, yet Gao’s voting rights will account for 75.6%.
Danke Apartment believes that with the continuous urbanization, high housing prices, and changes in the consumption habits and lifestyles of young people in Tier-1-and-2 cities, China’s rental market has great potential, and favorable policies will pull the trigger to boost the development of the industry.
According iResearch, a third party data analysis organization,the scale of China’s residential leasing market has reached the amount of RMB 1.8 trillion in 2018 and is expected to grow to RMB 3.0 trillion by 2023, among which Tier-1-and-2 cities accounting for RMB 1.2 trillion in 2018 and RMB 2.0 trillion by 2023.
It is worth mentioning that, one step earlier than the Danke Apartment, another Chinese long-term residential rent operator Qingke has been listed on the Nasdaq. It is recently reported that the company is “in arrears” with the property owner’s rent. Some owners have complained that, Qingke breaks the agreement unilaterally and tries to reduce the rent with the excuses of “loss making” or “relisting the high-in, low-out housing resources”. If the house owner disagrees, the rent payment will be suspended.
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