Shenzhen Dashao IPO failed!

In the capital market, a company’s road to listing is often accompanied by countless twists and turns and tests.

Recently, there was news from the cross-border e-commerce capital market that another cross-border enterprise’s listing was terminated.

Shenzhen-based Ruilian Technology's IPO terminated

According to the latest announcement released by the Shenzhen Stock Exchange, the IPO process of Ruilian Technology has been in the "termination of registration" status. The direct reason is that the company and its sponsor CICC withdrew their applications , which means that Ruilian Technology's IPO has ended in failure.

Looking back at Ruilian Technology’s IPO journey, it was actually full of twists and turns.

On June 2, 2022, Ruilian Technology submitted an IPO application to the Shenzhen Stock Exchange and was accepted.

Ruilian Technology plans to issue 30.01 million shares in this IPO, and plans to raise 1.123 billion yuan, which will be used for R&D center upgrade projects, headquarters operation center and information technology upgrade projects, and to supplement working capital.

On June 25, 2022, the Shenzhen Stock Exchange issued a round of inquiries.

On September 8, 2022, Ruilian Technology responded to the relevant questions in the Shenzhen Stock Exchange's inquiry letter.

On September 22, 2022, the Shenzhen Stock Exchange conducted a second round of inquiries on it.

On November 29, 2022, Ruilian Technology responded to the inquiry letter.

On January 6, 2023, the Shenzhen Stock Exchange Listing Committee meeting approved Ruilian Technology's listing application.

On December 18, 2023, Ruilian Technology submitted its registration application.

After submitting the registration, Ruilian Technology's IPO process fell into a long period of stagnation and it has been slow to obtain approval from the China Securities Regulatory Commission.

On September 30, 2024, Ruilian Technology's listing process was suspended because the financial information recorded in the IPO registration application documents had expired and needed to be supplemented and submitted.

On November 26, 2024, the official website of the Shenzhen Stock Exchange updated the China Securities Regulatory Commission's GEM stock issuance registration procedure termination notice regarding Ruilian Technology, officially announcing the termination of Ruilian Technology's GEM IPO registration.

Shenzhen Ruilian Technology Co., Ltd. (hereinafter referred to as Ruilian Technology) was established in 2009. It is mainly engaged in the research and development, production and sales of home video surveillance product hardware and software. This type of product belongs to the computer, communication and other electronic equipment manufacturing industry. Its products are mainly sold through online platforms, focusing on overseas consumer markets.

It is worth mentioning that the founders of Ruilian Technology, Liu Xiaoyu and Wang Aijun, previously worked at Huawei HiSilicon Semiconductor. After leaving, they founded the company with an initial registered capital of only 100,000 yuan. Now, Ruilian Technology's annual revenue has reached 2 billion yuan.

High crime rates have long been one of the main social problems in European and American countries. Many areas in these countries have low population density, and the living environment is mainly single-family houses. Most families have front and back yards and large open areas, so family safety protection is particularly important.

At the same time, the local population has problems such as aging. Under the combined influence of these factors, the demand for remote video monitoring and care is increasing.

Ruilian Technology has insight into the high demand for smart home cameras in the European and American markets. Therefore, from the beginning, the company has been deeply engaged in the smart security track.

Ruilian Technology uses online platforms as its main sales channels, covering Amazon, eBay, AliExpress, and its own websites. After the launch of its own brand Reolink, it continues to expand its market share overseas.

By selling smart security products, Ruilian Technology has captured a large number of consumers overseas and its market share is increasing.

On the Amazon platform, Reolink's products are priced from less than a hundred dollars to nearly a thousand dollars. Many of its products are regularly on Amazon's camera category BS list, and a large number of products are at the top of Amazon's best-seller list.

In recent years, Ruilian Technology's performance has maintained a rapid growth trend.

From 2021 to 2023, Ruilian Technology achieved operating income of RMB 1.367 billion, RMB 1.652 billion, and RMB 2.080 billion, respectively, and its non-GAAP net profit attributable to shareholders of the parent was RMB 242 million, RMB 281 million, and RMB 425 million, respectively.

Ruilian Technology faces multiple risk factors

Although Ruilian Technology's market performance is good, many aspects of Ruilian Technology have received special attention from regulators during the listing review process.

First of all, there is the risk that Ruilian Technology has no actual controller.

In its registration document, Ruilian Technology disclosed the risks of weakened control and having no actual controller.

It is understood that the company's current total share capital is 90 million shares. The two actual controllers of Ruilian Technology, Liu Xiaoyu and Wang Aijun , each hold 27.12% of the company 's shares. By signing a joint action agreement, the two were identified as the company 's joint actual controllers.

If the relevant agreement cannot be renewed in the future, Ruilian Technology will face the risk of having no actual controller , which may have an adverse impact on the company's decision-making efficiency , operating performance and future development.

Secondly, the proportion of Ruilian Technology's single product is too high.

Ruilian Technology's main products are home video cameras, video camera sets, and accessories. From 2021 to 2023, the company's sales of video cameras and video camera sets accounted for 93.93%, 92.32%, and 90.33% of its main business revenue, respectively, and the sales revenue of related products accounted for more than 99% of the company's main business revenue.

As market competition becomes increasingly fierce and technology continues to change, a single product line may expose the company to greater operational risks.

At the same time, Ruilian Technology's revenue from the Amazon platform accounts for too high a proportion, and it is too dependent on the platform.

According to the prospectus of Ruilian Technology, from 2021 to 2023, Ruilian Technology's sales on the Amazon platform were 868 million yuan, 1.087 billion yuan, and 1.340 billion yuan, respectively; the proportion of total sales was 63.80%, 66.05% and 64.85%, respectively, all exceeding 60%.

Although Amazon is the main online shopping platform in Europe and the United States, if competition in the European and American markets intensifies or the local economic environment changes, it may directly affect Ruilian Technology's sales on Amazon's European and American sites.

In addition, if the platform's store management, return and exchange, payment and other policies are adjusted to the disadvantage of sellers, or Amazon adjusts its business strategy to suppress the platform's non-independent brands, or the company is unable to continue to meet the platform's rules and requirements, it may also have an adverse impact on the company's business operations.

On the other hand, Ruilian Technology had distributed large dividends before applying for its IPO.

In 2020 and 2021, the company paid a total of more than 200 million yuan in dividends (accounting for about 50% of the net profit of the year), which attracted the attention of the Shenzhen Stock Exchange. The Shenzhen Stock Exchange inquired about the necessity and rationality of Ruilian Technology's large cash dividends, the flow of funds for cash dividends, and their final use .

The reply letter shows that several major shareholders of Ruilian Technology, Wang Aijun, Liu Xiaoyu, Zhou Rui and Song Yunlong, received after-tax amounts of 42.1651 million yuan, 42.1651 million yuan, 32.1916 million yuan and 32.1916 million yuan respectively, which were mainly used to purchase financial management, funds, insurance, real estate, large deposits, etc.

In short, a company’s road to IPO requires a lot of efforts. In the fierce market competition and strict regulatory environment, if a company wants to be successfully listed, it must continuously improve its comprehensive strength and market competitiveness and avoid risk factors that are not conducive to the company’s development.

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