7 Days Inn Listing Brings in 3.7 Billion Yuan Revenue
On November 20, 2009, Eastern Time, 7 Days Group Holdings Limited was officially listed on the New York Stock Exchange, becoming the second Chinese economy hotel brand to be listed in the US after Home Inn.
The trading code for 7 Days Inn is "SVN", with an issue price of $11. This time, a total of 10.1 million American Depositary Shares (ADS, where 1 ADS equals 3 ordinary shares) were issued, raising $111 million. On the first day of listing, 7 Days Inn opened at $13.5, up 22.7% from the offering price of $11. It eventually closed at $12.5, representing a rise of 13.64%.
Five years ago, Zheng Nanyan, who had served as Vice President and South China General Manager of Ctrip.com with options worth millions, decided to leave and start his own business, founding 7 Days Inn. Now, as the founder and CEO (holding 13.4% stake), his net worth has increased to 3.7 billion yuan. Meanwhile, He Boquan, the chairman of 7 Days Inn and the largest shareholder holding 35.3%, has a paper wealth approaching 1 billion yuan.
Deep Ties with Ctrip
In fact, similar to Hanting Hotels, Zheng Nanyan also has deep ties with Ctrip. In 2000, Zheng Nanyan, with a background in IT technology, "accidentally" entered Ctrip. Within four years, he became the vice president in charge of the national market. His experience at Ctrip gave him a comprehensive understanding of the operations and business model of the hotel and tourism industry, sparking his interest in the vast domestic economy hotel market. In June 2004, by chance, Zheng Nanyan met He Boquan, the former head of Lebishi and now the chairman of Today Investment. This encounter became a significant turning point in Zheng Nanyan's life.
In October 2004, Zheng Nanyan resolutely gave up his position as vice president of Ctrip and options worth millions; in 2005, he co-founded 7 Days Inn with He Boquan. He Boquan became the largest shareholder and chairman of 7 Days Inn, while Zheng Nanyan invested nearly 8 million yuan, holding about 14% of the shares, and served as the CEO of 7 Days Inn.
Since then, 7 Days Inn has rapidly expanded, growing from 5 hotels in 2005 to 284. The rapid development of 7 Days Inn attracted PE funds, receiving nearly $200 million in investments from Warburg Pincus, Actis, Deutsche Bank, Merrill Lynch, among others.
In 2007, Zheng Nanyan had expressed plans to list by mid-2008. If it weren't for the impact of the financial crisis, the IPO might have occurred earlier.
With the successful listing on the NYSE, the net worth of the two founders soared. According to the prospectus, before the IPO, He Boquan owned 35.3% of the shares, Zheng Nanyan 13.4%, Warburg Pincus 13.4%, and Actis 16.6%. Calculated based on the opening price of $13.5, the net worth of Zheng Nanyan, serving as CEO, rose to $54.81 million (approximately 3.7 billion yuan RMB), while He Boquan's paper wealth approached 1 billion yuan.
However, as of now, the fast-growing 7 Days Inn remains in a loss-making state. For 2008 and the first nine months of 2009, the net losses of 7 Days Inn were 209.9 million yuan (approximately $30.8 million) and 9.3 million yuan (approximately $1.4 million), respectively.
Funds Raised for Expansion
It is reported that other domestic economy hotel brands like Hanting and GreenTree Inn also have plans to go public. Industry insiders pointed out that entering the capital market can help hotel brands achieve long-term development. Subsequently, the concentration of industry brands will further strengthen, and some weaker brands may face the fate of being acquired.
According to incomplete statistics from China Economy Hotel Network, ranked by the number of rooms, 7 Days Inn ranks fourth in the economy hotel sector. As of the third quarter of 2009, Home Inn led with 67,629 rooms and 585 hotels in operation, while 7 Days Inn ranked fourth with 30,671 rooms and 284 new hotels. Jinjiang Inn and Motel 168 ranked second and third, respectively.
7 Days Inn stated that the funds raised from this listing would be used to repay senior bonds issued by the company, as well as for working capital and operational needs, including expanding the chain network and improving the existing hotel environment.
"As the Shanghai Hanting hotel market has entered a mature phase, competition has moved from the product stage to the sales stage, and the next round will enter the brand strategy market promotion stage," said Hu Shengyang, CEO of China Economy Hotel Network. He indicated that key factors in market competition include cost control, capital support, technical advantages in management systems, and talent competition strategies. He predicted that with active mergers and acquisitions, the economy hotel industry will become more concentrated.
News Link: Chinese Companies' U.S. Listings Rebound
As the global economy recovers, some Chinese companies have begun to restart their U.S. listing plans. Recently, there seems to be a rebound in the wave of Chinese companies going public in the U.S. On November 19, Cord Blood China Corporation (CCBC), spun off from Golden Meditech, successfully listed on the NYSE. Additionally, Shenyang private enterprise Nokang Biomedical Co., Ltd. recently submitted its IPO application to the U.S. Securities and Exchange Commission (SEC) and plans to list on NASDAQ, raising $55 million.
Industry insiders pointed out that after the global financial crisis, international investors still see potential in the Chinese economy, which recovered first from the crisis. With the warming global economy, U.S. securities investors' enthusiasm for foreign-listed companies, especially Chinese ones, has risen again.
According to the SEC website, three Chinese companies have recently filed public documents preparing to list on the NYSE, including Shenzhen Createch Technology, a thin-film solar equipment manufacturer, Nanjing Lianchuang Technology, a telecommunications software technology solutions provider, and Beijing Rui-Jin Genki Fertility Medical Group Holding Limited, a medical services and operations provider.
Due to the impact of the financial crisis, Chinese companies' listings in the U.S. fell to a low point. Data shows that in the entire year of 2007, 29 Chinese companies went public on U.S. stock markets, raising a total of $6.8 billion. In 2008, only two Chinese companies were listed on the U.S. market, raising a total of $96.6 million.