Investors who don’t frequent Chinese social media communities may have never heard about Ruhnn Holding Ltd (NASDAQ:RUHN) before, yet the influencer-giant which has become famous for its ability to cultivate popular social media stars has certainly drawn widespread interest across Wall Street after drumming up some $125 million in its U.S. market debut. The company sold 10 million American depositary shares at a price of $12.50 each during its IPO, which means that Ruhnn fell short of the $200 million it was originally aspiring for according to financial filings.
Here’s everything we know about Ruhnn, how the company is reshaping social media and influencers as we know them, and where it’s going next after its exciting market debut.
Ruhnnn is building a generation of social media influencers
One of the reasons Ruhnn is so well-known across China is that the company is hard at working establishing the next generation of popular social media influencers. These popular social stars and starlets, who command massive audiences that sometimes grow into the hundreds of thousands or even millions, are capable of influencing the everyday purchasing decisions of those who follow their social media feeds. Ruhnn fosters these influencers from an early stage in their career, enabling them to sell through its clever e-commerce operation in an effort to drum up some income from loyal fans.
According to S-1 filings made with the SEC ahead of its market debut, Alibaba-owned Ruhnn was actually hoping for a larger IPO take home than it actually enjoyed. Previously, the company was expecting to make some $200 million from its market debut, though seasoned investors will obviously be familiar with the lofty-yet-unrealistic expectations that sometimes are included in such filings. Nonetheless, Ruhnn brought home $125 million that will doubtlessly help the company achieve its commercial goals going forward.
Ruhnn’s prospectus asserts that the company will use the proceeds from its market debut for a wide variety of reasons. First and foremost, Ruhnn will be spending about 40 percent of its recent take on identifying additional monetization channels and pursuing strategic investments in its industry, which is crucially important because the company must constantly be coming up with new ways to bolster its social-media-derived income streams. About 30 percent of the company’s IPO proceeds will also be used to identify and cultivate talented influencers that are merely called KOLs in the Chinese social media ecosystem.
Another 20 percent of the company’s take will be put towards AI, data analytics, and other technological marvels that Ruhnn hopes will prove to be useful in the long-term cultivation of aspiring influencers. Investors will also be interested in examining Ruhnn’s portfolio of popular influencers, who are really the future of the company and could determine if it ever achieves profitability.
Ruhnn reaches out to more than 148 million fans
There’s good news for investors where influencers are concerned; already, Ruhnn has established contracts with at least 113 influencers who can brag about having a combined fan network of at least 148.4 million fans. This impressive figure is going to be a positive mark on Ruhnn’s record as it goes forward, as the company will find it continuously necessary to bolster its stock of influencers and enhance their ability to reach Chinese consumers who are enjoying disposable income for the first time in generations.
The burgeoning Chinese middle class will continue to cause e-commerce demands to spike upwards in the near-future, so companies like Ruhnn have serious potential to ride this wave by harnessing the power to log activity of their influencers. The rate of its top line revenue growth is beginning to decelerate in a way that could startle some investors, however, so Ruhnn still has plenty of challenges ahead of itself despite the company’s prosperous potential.
In the third quarter of fiscal year 2018, for instance, Ruhnn posted losses of some $41 million. The company hasn’t yet been able to attain profitability despite its widespread social media empire, in other words, which could pose problems for its long-term viability given concerns surrounding the future of the influencer industry. Social commentators are beginning to mull the prospect of highly regulating the influencer industry, for instance, arguing that it’s predatory when it comes to appealing to younger users on social media. Ruhnn will predominantly have to worry about Chinese social customs and laws surrounding influencers more than its Western counterparts, however, so investors in the company may not see regulation as a major long-term threat.
Nevertheless, some brands are beginning to turn away from huge influencers towards smaller followings instead, arguing that such an approach is necessary for direct-to-consumer influencing that has a huge impact on a small but critical target audience. This could be indicative of tough days ahead for Ruhnn when it comes to maintaining a robust network of talented influencers. The company’s recent IPO fell short of expectations, too, so investors looking at Ruhnn going forward will have plenty to contemplate before financially backing the company.