IPO Update: Molecular Data Readies Plan For U.S. IPO

Summary

• Molecular Data has filed proposed terms for its $69 million U.S. IPO.
• The firm operates an online marketplace for the chemical industry in China.
• MKD has grown its marketplace significantly but the firm's revenue growth is decelerating and it is producing significant operating and net losses, so I'll pass on the IPO.
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Quick Take

Molecular Data (MKD) has filed to raise $69 million in an IPO of ADSs representing underlying Class A shares, per an amended F-1/A registration statement.

The company operates an online marketplace for the chemicals industry in China.

MKD has done well to grow its gross merchandise value [GMV] marketplace, but the chemical industry’s slowing forecast growth combined with the firm’s slowing growth and negative operating & net results lead me pass on the IPO.

Company & Technology

Shanghai, China-based MKD was founded to develop an online marketplace to enable chemical industry market participants to list, buy, sell, and arrange for transportation and warehousing of industrial chemicals.

Management is headed by Founder and Chairman Dr. Dongliang Chang, who has extensive industry experience and previously published over 30 articles, has received 11 patents and obtained his biology doctorate from the Swiss Federal Institute of Technology in 2004.

The firm provides a range of e-commerce capabilities from within its website and service, as shown in the graphic below:

MKD has received at least approximately $75 million from investors including Cool Emotion International, Trustbridge, Max Smart, Greatest Investments, Vangoo, Sinovation Ventures and TR Grand Fund.

Customer/User Acquisition

The company provides its services through its marketplace as well as through a direct sales model where it acquires chemicals and resells them on its marketplace.

For its financial solutions, the firm partners with banks and non-bank providers to provide financing options for users.

The group has also developed warehousing and logistics solutions and service provider relationships in order to facilitate buyer and seller transactions on its platform.

Sales and marketing expenses as a percentage of revenue have been dropping as revenues have increased, as the figures below indicate:

Sales & Marketing	Expenses vs. Revenue
Period	Percentage
Nine Mos. Ended Sept. 30, 2019

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.