🚗 IPO of Smart Driving Companies: Bumpy Roads and Uncertain Future 🚗

Recently, the China Securities Regulatory Commission (CSRC) released a notice of record for the overseas listing of Momenta, an intelligent driving supplier, which means it has been approved for listing in the United States. On May 27, another intelligent driving supplier, Youjia Innovation, submitted its listing application to the Hong Kong Stock Exchange, starting the IPO process. This year, several domestic autonomous driving companies, including Sai Mu Technology, Black Sesame Intelligence, Horizon Robotics, Zongmu Technology, and Pony.ai, have disclosed plans to raise funds in overseas markets.

The enthusiasm of domestic technology companies for global listings is heating up. Data from the CSRC shows that as of June 18, this year, 81 companies have been approved for overseas initial public offerings, exceeding the total of 72 for the whole of last year. In terms of industry classification, among the companies planning to go public overseas, technology companies such as autonomous driving and artificial intelligence are a major highlight. Some of these companies have previously been "disappointed" with the A-share market and have "changed course" to Hong Kong and the United States, which also makes their listing journey full of interest.

🔄 A Rocky Road to Listing 🔄

"For most intelligent driving technology companies, financing is one of the fundamental elements for survival and development under current conditions," said Professor Zeng Xin from the University of Science and Technology Beijing. The intelligent driving industry is an industry with high investment and long return period. Technology research and development requires a lot of capital, so continuous financing is essential. At the same time, it is precisely because this industry is recognized globally that financing towards overseas and the global market has become a feasible path.

Momenta, which plans to list in the United States, is one of the unicorn companies in the domestic intelligent driving field. According to its filing notice, the company plans to issue no more than 63.3529 million common shares and list on the U.S. Securities Exchange or the New York Stock Exchange. This also confirms previous rumors that it was planning an overseas IPO.

It is reported that, to date, Momenta has obtained 7 rounds of financing, with a total public financing amount exceeding 1.2 billion US dollars, and investors include well-known institutions and OEMs such as Shunwei Capital, Cathay Capital, Tencent Investment, and Yunfeng Fund.

Compared with Momenta, Youjia Innovation has "changed course" from the A-share market to the Hong Kong stock market. It had previously started A-share listing guidance on August 9, 2023, but on May 23, 2024, the company terminated the listing guidance agreement with the guidance institution. Youjia Innovation revealed that considering the overall market environment and the future strategy of seizing international market opportunities, listing on the Hong Kong Stock Exchange will be more conducive to the company's development.

Statistics show that since its establishment in 2014, Youjia Innovation has completed 17 rounds of financing, with a total financing of about 1.448 billion yuan, and investors include Suikai Investment, Guangzhou Industrial Investment Capital, etc. Youjia Innovation's prospectus shows that its revenue from 2021 to 2023 was 175 million yuan, 279 million yuan, and 476 million yuan, respectively. Among them, Youjia Innovation's intelligent driving solution revenue was 173 million yuan, 267 million yuan, and 386 million yuan, accounting for 98.8%, 95.7%, and 81.1% of total revenue, respectively; the loss for the year was 140 million yuan, 221 million yuan, and 207 million yuan, with a cumulative loss of 568 million yuan in three years.

💡 Financing Difficulties and IPO as an Effective Way to "Transfuse" 💡

It is worth noting that after a "silent period" in the past two years, the entire intelligent driving industry has almost all entered a "fever period" recently, seeking to go public, including companies such as Momenta, WeRide, Youjia Innovation, Zongmu Technology, Pony.ai, Horizon Robotics, AutoX,黑芝麻智能, and others.

"Financing is one of the main purposes of the cluster listing of smart driving companies, but it is also related to the industry's prosperity," said Zeng Wenxiang, a researcher at the Northern Big Data and Artificial Intelligence Research Institute. Objectively speaking, intelligent driving companies have a large scale of R&D investment and are "big spenders," but the difficulty of financing has increased in recent years. Data shows that since 2022, the disclosed financing amount in the autonomous driving field has been sharply reduced from 159.19 billion yuan in 2021 to 20.5 billion yuan, directly shrinking to 13% of the original. The situation in 2023 has not improved, with a total of 77 disclosed financings amounting to about 8.367 billion yuan, showing a continuous and significant downward trend, indicating that the industry has not yet emerged from the "cold winter." For example, Momenta has not disclosed any new financing since its C+ round of financing in 2021. This situation has further exacerbated the plight of smart driving companies that have been losing money for several years. "It is precisely because the fundraising market is on the decline that smart driving companies have to flock to the IPO track, and since 2023, it has stimulated a 'listing tide'." He said that the reduction in venture capital and the increase in the number of listed financing companies form two inverse trends, also marking a change in the main financing model of the smart driving industry, that is, from venture capital and market financing to IPO financing.

It is a fact that several smart driving companies in China have relatively stable big customers. For example, Momenta has obtained nearly half of the customers in the world's top ten automotive groups, and has carried out mass production cooperation with General Motors, Mercedes-Benz, Toyota, SAIC, BYD and other car companies on L2-level smart driving systems. Moreover, Momenta's L4-level autonomous driving taxi has also been launched in Suzhou, and the IMAD intelligent driving system of SAIC's Zhiji brand model is equipped with Momenta's smart driving technology solution.

Although this is the case, smart driving companies still need a large amount of capital investment. "Overall, the smart driving industry is still in the period of technological development and the industry's input period," said Zeng Xin, indicating that at this stage, the technology is in development and requires continuous investment. For example, the industry currently has different choices in perception technology routes such as map-based and non-map-based, as well as "radar school" and "vision school," and has not yet formed a unified technical solution. Moreover, different solutions are in development and require a lot of investment for continuous research and development, continuous improvement and optimization. Therefore, there is still a long way to go for companies to make a profit. As a result, smart driving companies are urgently in need of financing, especially through listing financing to obtain the strength to move forward.

On the market level, at present, the commercialization of autonomous driving is difficult to realize, and L4-level autonomous driving is only in the pilot demonstration or trial operation stage in some areas; although autonomous driving in closed space scenes has been implemented, it is still difficult to make a profit, and the strict regulatory requirements for passenger car autonomous driving also squeeze the profit space of autonomous driving companies at this stage. As a result, investors have become more cautious, and companies need to seek more financing channels.

"The current state of industry development and lack of corporate funds has forced smart driving companies to join the IPO," said Sun Quan Shu, a researcher at the Research Center for Economic Development of Shanghai Advanced Institute of Finance. In the face of difficulties in fundraising, most have not yet achieved self-sufficiency, and there is a large gap between business conditions and valuations, going public or "blood transfusion" is an effective way. Although the minds of various smart driving companies are different, in general, if the listing is successful, it can alleviate the financial pressure of the company, bring brand premium, and obtain more market recognition. At the same time, listing can facilitate subsequent capital operations, mergers and acquisitions, and global business expansion of the company, and can also effectively help other financing under other conditions. Entering the stock market can also bring new imagination space to smart driving companies. Once recognized in the stock market, the stock price rises, which will bring significant benefits to the company. Looking at the performance of technology companies such as Tesla and Nvidia that have gone public in the past, the stock market has indeed given some technology companies the opportunity to realize their dreams. In addition, the funds and brand influence brought by listing also make it easier for listed smart driving companies to recruit or retain the high-end professional talents they need, which is also one of the real driving forces for smart driving