Ruhnn (NASDAQ:RUHN), an Alibaba-backed eCommerce firm that aims to nurture influencers and profit off their immense social followings, enjoyed an IPO that raised $125 million after the company listed on the Nasdaq this past Wednesday. The company fell far short of its $200 million ambitions, with some arguing that its focus on influencers is still too early to convince investors who are less than thoroughly educated on the world of social media marketing.
Here’s everything we know about Ruhnn and how it hopes to reshape China’s budding eCommerce sector, and how the company’s recent market debut will impact its near-future.
Ruhnn fights the trade war
Despite the ongoing trade war ignited by President Trump between the United States and China, Ruhnn (NASDAQ: RUHN) intended to go public on American markets despite worrying signs that Chinese IPOs are receiving a lackluster welcome from Western investors. The decision may prove to have been a bad bet for the company, as it failed to drum up the $200 million or so it hoped that its IPO would generate according to a prospectus filed with the SEC ahead of its market debut. Nevertheless, there’s still a huge demand for companies catered towards the growing influencer market, as the future of social media marketing is clearly drifting in a direction dominated by popular figures and their immense online followings.
According to S-1 filings made with the SEC, Ruhnn hoped to leverage its ability to woo over influence leaders into about $200 million from investors. The company ultimate sold 10 million American Depositary Shares at $12.50 each, a figure at the midpoint of its expected range that ultimately drummed up about $125 million for the company. While this is far short of the $200 million that the company desired, it’s still an impressive amount that will convince some investors that the market is clearly interested in influencers.
Chinese influencers doing delivery jobs have already proven that they have a capacity to generate huge amounts of economic activity, too, with some $4.9 billion in sales being generated by Chinese thought leaders in 2017, per the company’s filings with the SEC. With the rise of “retailtainment” showing no sign of abating anytime soon, investors who are interested in this area have clear reasons to believe that companies like Ruhnn will keep growing in the near-future. Other financial information in the company’s prospectus gives investors reason to believe that it’s on a growth path, too.
Ruhnn has hundreds of millions of fans
In 2018 alone, Ruhnn saw its contracted influencers generate at least $300 million in sales, with nearly 150 million fans being collected across various social media platforms that the company surveys for prospective customers. This should clearly demonstrate to investors that Ruhnn is no small fish and has a serious capacity to make a name for itself in a competitive marketplace crowded with influencers trying to make a name for themselves. The firm, located in Eastern China, has effectively turned itself into a massive talent agency dependent on the ability of its contracted influencers to generate a buzz on popular digital platforms.
Investors will worry about Ruhnn being over invested in certain influencers, however, with the company being too dependent on its leading influencers when it comes to generating revenue and drawing a buzz. A single influencer accounted for nearly half the company’s sales for three years, according to TechCrunch, which illustrates that it may be far too dependent on individual personalities that could quickly fade in fast-changing social environments or in the face of scandalous behavior. Nevertheless, influencer marketing is clearly the future of social media, so it’s likely that the company will grow more adept at diversifying its talent pool over time.
Ruhnn’s take home from its recent market debut may have fallen short of some lofty expectations, but the influencer-channeling startup still has plenty of capital to disrupt the Chinese eCommerce scene. With the rise of the ultra-influencer making it imperative for the company to diversify its talent pool, the future of Ruhnn could be up to whether the company can secure more contracts with talented influencers in the near-future. Ruhnn still isn’t profitable, and investors may see its recent market debut as a mild stumble, but the ambitious company still has big plans for the budding eCommerce sector in China.