According to the latest disclosure on the official website of the Shanghai Stock Exchange, Mao Geping Cosmetics Co., LTD. (referred to as Mao Geping Cosmetics) has recently applied to withdraw its application for initial public offering (IPO), and the current IPO status is shown as terminated. This signifies the end of Mao Geping Cosmetics’ 8-year journey towards going public.
CHAILEEDO has noticed that not long ago, Zhejiang Peptides Biotech (referred to as ZPC) also voluntarily withdrew its IPO application. In other words, within just 10 days, two cosmetics-related companies have voluntarily terminated their IPOs.
This indicates that the cold winter for cosmetics companies seeking to go public may continue into 2024.
The ups and downs of the IPO journey
According to the disclosure documents on the Shanghai Stock Exchange’s official website, Mao Geping Cosmetics recently submitted an application to the exchange titled “Application for Withdrawal of the Initial Public Offering and Listing on the Main Board of Mao Geping Cosmetics Co., LTD.” As a result, the Shanghai Stock Exchange has decided to terminate the review of Mao Geping Cosmetics’ listing on the main board. However, the documents did not disclose the reason for the withdrawal of the IPO application by Mao Geping Cosmetics.
Looking back at Mao Geping Cosmetics’ path to going public, it has faced numerous setbacks over a span of 8 years. In 2016, Mao Geping Cosmetics initially submitted its prospectus with the intention of listing on the Shanghai main board and updated it for the second time in 2017.
However, at the end of 2017, Mao Geping Cosmetics announced the suspension of its IPO, citing the “issuer’s request to suspend the review or other factors that hindered the normal progress of the review.” This halted their journey to listing. The following year, external shareholder Jiuding Group issued an announcement stating that they were under investigation by the China Securities Regulatory Commission for suspected violations of securities laws and regulations. This led to speculation that Mao Geping Cosmetics’ listing was hindered due to the investigation of Joyin Group.
It wasn’t until October 2021, after a five-year wait, that Mao Geping Cosmetics’ IPO was successfully approved, signaling that it was finally nearing listing. However, just when everyone was eagerly anticipating another cosmetics company entering the capital market, there was a long wait, and there was no news about Mao Geping Cosmetics’ listing.
In March of the previous year, against the backdrop of comprehensive registration system reforms, Mao Geping Cosmetics once again submitted its application and updated its prospectus. This marked the reopening of Mao Geping Cosmetics’ path to listing. However, in September of the same year, the listing process was once again halted due to expired financial information. This time, the news of the IPO termination came after people’s expectation that Mao Geping Cosmetics would update its financial information and continue its push towards the capital market.
According to the prospectus, Mao Geping Cosmetics reported revenues of 882 million yuan, 1.43 billion yuan, and 1.682 billion yuan, respectively, for the years 2020 to 2022. The net profits for the same period were 198 million yuan, 327 million yuan, and 349 million yuan, respectively.
Specifically regarding the brand, sales revenue for the Mao Geping brand was 754 million yuan, 1.28 billion yuan, and 1.571 billion yuan, respectively, for the years 2020 to 2022. The year-on-year growth for 2021 to 2022 was 69.34% and 23.01%, respectively.
It is worth mentioning that prior to this, Mao Geping Cosmetics had planned to raise 1.121 billion yuan through the IPO, with only 97.1374 million yuan allocated for the construction of the research and development center, while 800 million yuan was planned for channel development and brand promotion projects.
Investment and factory construction go hand in hand: Mao Geping Cosmetics accelerates its pace
Despite frequent obstacles on the path to listing, Mao Geping Cosmetics has been actively working on improving its industry chain and enhancing its research and development foundation in the past two years.
For example, in April 2023, Mao Geping Cosmetics laid the foundation and started construction of its beauty and cosmetics research and development factory in Hangzhou. The project covers an area of 44,838 square meters and is expected to be completed and put into operation within two years. Mao Geping Cosmetics publicly stated that the establishment of its own factory is important because the company has entered a new stage of development that requires alignment with its development plans.
In addition to building its own factory to move away from the “OEM” label, Mao Geping Cosmetics has also strengthened its industry chain through the acquisition of OEM factories. In October 2023, a wholly-owned subsidiary of Mao Geping Cosmetics, Hangzhou Xingyi, became the third-largest shareholder of Huameikangyan (Suzhou) Biotechnology Co., Ltd. through the acquisition of equity. Huameikangyan was founded by the former CEO of Intercos China, and Mao Geping Cosmetics’ investment in the company may be due to its recognition of the company’s research and development direction.
This year, Mao Geping Cosmetics has been “firing on all cylinders”. Recently, public information shows that Mao Geping Cosmetics won the bidding for the SC0402-B1/B2/S2-15 plot located in the core area of Wangjiang New City for a total price of 593 million yuan. According to the Zhejiang Provincial Natural Resources Trading Center’s official website, the land area is 11,960 square meters, with a plot ratio of 4.0 and a volume of approximately 48,000 square meters, with a height limit of 72 meters.
According to the investment and development agreement for the Wangjiang plot, the successful bidder is required to allocate 50% of the land for the construction of a national headquarters (cosmetics research and sales) project. The future project’s annual revenue should not be less than 2 billion yuan, with an annual tax revenue of not less than 400 million yuan, for an evaluation period of five years. It is widely speculated that this plot may become the headquarters of Mao Geping Cosmetics in Hangzhou.
Just after securing this important plot, Mao Geping Cosmetics swiftly invested in another company, Hangzhou Shangduhui Cosmetics Technology Co., Ltd., with a 100% ownership stake.
Regarding Mao Geping Cosmetics’ new investment initiatives, CHAILEEDO contacted the company’s relevant personnel, and they responded, “Currently, the company is indeed focusing more on research and development.”
Through a series of actions, it is evident that Mao Geping Cosmetics is strengthening its core competitiveness and shifting its focus more towards the research and development aspect of its business. Although the path to listing has temporarily come to a halt, Mao Geping Cosmetics is clearly continuing to strengthen its own capabilities, aiming to achieve even better results in the cosmetics market.
The ebb tide of IPOs in the beauty and cosmetics industry continues
CHAILEEDO has noticed that, in fact, for Mao Geping Cosmetics’ sudden withdrawal of its IPO application, industry insiders had openly stated earlier that companies like Mao Geping Cosmetics were evidently not in line with the encouraged policy direction. “They are likely to withdraw, it’s just a matter of time.”
Some industry insiders have also told CHAILEEDO, “In the past two years, the IPO policies for consumer-oriented companies, including beauty and cosmetics, have significantly tightened, and the requirements for companies’ technological innovation capabilities are also increasing.”
CHAILEEDO found that since 2023, at least five beauty-related companies have terminated their IPO applications. For example, beauty brands Misisfu and cosmetics operator Larami both voluntarily withdrew their applications in July 2023. Misisfu, in its related announcement, stated that the withdrawal of the IPO application was due to considerations of the company’s own development and current industry regulatory policies.
CHAILEEDO notes that in August 2023, the China Securities Regulatory Commission (CSRC) explicitly stated that, based on recent market conditions, it would temporarily tighten the IPO pace to promote a dynamic balance between investment and financing. According to Wind data, since the CSRC proposed the temporary tightening of IPOs, a total of 54 companies have terminated their IPOs.
In addition to policy tightening, the national policies in recent years have overall tilted towards industries with technological innovation and advanced manufacturing attributes. In response, some industry insiders have analyzed in the media that the Central Financial Work Conference held last year proposed optimizing the structure of financial supply, allocating more financial resources to promote technological innovation, advanced manufacturing, green development, and small and micro-enterprises.
According to public reports, market participants generally believe that the probability of a tightening IPO policy in 2024 is high. Coupled with regulatory authorities raising the quality requirements for listed companies, it is expected that the number and financing scale of IPOs will decline. However, with the upcoming introduction of the direct IPO system, the Beijing Stock Exchange is expected to maintain growth in the number of newly listed companies and financing scale.
Looking ahead, the Beijing Stock Exchange and the Hong Kong Stock Exchange may become important choices for domestic beauty and cosmetics companies to go public.
In the current difficult situation for beauty and cosmetics companies to go public, some experienced industry insiders point out that this does not mean that these companies have no chance to go public. Instead, it raises higher demands on companies’ innovation capabilities. “Companies should cultivate their internal strength, find their own path of innovation, improve the scientific research content of their products, and win the market and capital choices by building their own technological strength.”
Going public is not the end, and opportunities are always reserved for those who are prepared. For companies, voluntarily withdrawing an IPO application does not mean truly exiting the path to going public. By optimizing and adjusting themselves, cultivating internal strength, or changing the listing platform, there will still be opportunities to impact the capital market in the future.
