China’s e-learning firm Youdao debuts on US stock market

Youdao, Inc., an intelligent learning firm of China’s internet giant NetEase, rang the opening bell on the New York Stock Exchange on Friday to mark its initial public offering (IPO) in the U.S. equity market.

The IPO involved 5.6 million American Depositary Shares (ADSs) and was priced at 17 U.S. dollars per ADS, NetEase announced on Friday.

The shares were traded under the ticker symbol DAO. Each ADS represents one Class A ordinary share of Youdao.

The aggregate offering size of the IPO and the concurrent private placement is approximately 220.2 million dollars, which includes approximately 95.2 million dollars of ADSs sold in the IPO, without the exercising of an over-allotment option.

Youdao has granted the underwriters an option, exercisable for 30 days from the date of the final prospectus, to purchase up to an aggregate of 840,000 additional ADSs to cover over-allotments.

The total offering size of the deal above will reach approximately 234.5 million dollars, assuming the underwriters exercise their over-allotment option in full.

Certain investment funds managed by Orbis Investment Management, NetEase’s biggest institutional investor, have agreed to purchase Youdao’s common shares worth 125 million dollars in a private placement transaction.

Founded in 2006, Youdao gathered over 100 million average total monthly active users (MAUs) in the first half of 2019, as it furnished learning products and services for all-age groups in China for the study of various subjects.

The company’s net revenues surged 67.7 percent year over year to 79.9 million dollars for the six months ended June 30, as supported by four primary business operations, including online knowledge tools, online courses, interactive learning apps and smart devices.

The company’s flagship Youdao Dictionary, launched in 2007 and free of charge, is China’s No.1 language app in terms of MAUs in the first half of 2019, which hit a striking 51.2 million, according to the research and consulting firm Frost & Sullivan.

The e-product has also become a crucial way for Youdao to expand its user base in a swift and benign way, Zhou Feng, CEO of Youdao, told Xinhua on Friday.

“We would put some ads in the dictionary. And more importantly, we will attract our users with some online courses catering to their needs. Then they will purchase those services,” Zhou said.

“In this way, we commercialize our products, and we believe this is a quite benign and rapid way to gather a large number of consumers,” he added.

Yet the company’s net losses reached 24.5 million dollars for the six months ended June 30, more than twice compared to that of the same period last year, according to Youdao’s latest prospectus.

China’s online education market has been growing rapidly with huge potential, and Zhou remains highly optimistic on the industry. His company is committed to upgrading services and products with advanced technologies.

“This is an industry that we see with bright prospect, because digital services, such as online courses, can help realize better resource allocation, commercialize good (education) contents and reap relatively high prices,” he noted.

In 2018, the overall size of China’s intelligent learning industry reached approximately 14.46 billion dollars, and is expected to grow to around 100.7 billion dollars in 2023, according to Frost & Sullivan.

Joint bookrunners of the offering include Citigroup, Morgan Stanley, Credit Suisse, China International Capital Corporation, Hong Kong Securities Ltd., Tiger Brokers and HSBC Securities (USA).

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