Q&K International Group Ltd., a long-term apartment rental platform in China, has lowered its target to $59 million in an initial public offering on Tuesday in New York.
The Shanghai-based company cut the number of ADSs on sale to 2.7 million from 5.2 million, expecting to sell in the price range of between $17 to $19 per American depositary share, it said in the prospectus on November 1st.
“Providing homes for China’s young people,” is the company’s mission. It provides ready-to-move-in rental and value-added services, targeting China's youth in urban areas, according to its filing.
Q&K leases 97,000 apartments from landlords and transform these apartments into standardized furnished rooms to lease to people, which it called “dispersed lease-and-operate model.”
Another Beijing-based rental platform Phoenix Tree Holdings Ltd. shared the similar model with Q&K. The company operates 406,746 apartment units through Danke.com since 2015 with two branded products, Danke Apartment and Dream Apartment. It filed its preliminary prospectus on October 30th, seeking an initial public offering of $100 million in New York.
The two rental platform runners focus on different regions, where Phoenix Tree is headquartered in Beijing in Northern China. Q&K self-claimed as first among branded long-term apartment operators in the Yangtze mega-city cluster centered around Shanghai in terms of gross rental value in 2018.
The company said China’s long-term rental market is still under-penetrated compared to developed countries like Germany and Japan, which suggests a huge growth potential. The long-term rental penetration rate, referring to the number of long-term rental tenants as a percentage of the total population, in China is 17.2% as of December 31, 2018, compared with 55.0% and 38.7% for Germany and Japan respectively, as the company said in its prospectus.
For the nine months through June, Q&K reported revenue of $130.8 million up 51% year-over-year. Net loss was $54.4 million, at an increase of 15% from the same period last year, as it said in the filing.
Underwriters in the IPO will have an option to acquire an additional 405,000 additional ADSs, Q&K said. Listed underwriters on the deal are Morgan Stanley & Co. LLC and China International Capital Corp. Ltd.
The funds from the IPO will be used primarily for apartment network expenditure, which takes approximately $16 million, and continued investment in the technology systems and infrastructure for $4 million.
Q&K’s shares have been approved for a listing on the Nasdaq under the ticker “QK."