The Chinese mobile-phone and device maker is a leading-seller of smartphones on the African continent with its Tecno brand. It soared as much as 96 per cent on its first day of trading on the Nasdaq-style stock market of China, a development that pushed its valuation to $7.7 billion for a brief period.
The company issued 80 million A-shares, pegging the opening price at 35.15 yuan (about $5) in a bid to raise 2.8 billion yuan (around $394 million).
A-shares are those shares commonly issued by corporations in mainland China. A-shares are typically available for purchases by mainland citizens, exclusively.
What Is STAR?
STAR is the new Nasdaq-like board of Shanghai Stock Exchange and is for tech stocks, which went live earlier in July with 25 corporations listing in an IPO.
Transsion is putting plans in top gear to invest 1.6 billion yuan (nearly $227 million) of its STAR Market raise on developing more phone assembly hubs. It also wants to spend about 430 million yuan ($62 million) on R&D, which includes a mobile phone research & development center in Shanghai.
The maker is maintaining a manufacturing facility in Ethiopia to provide support for its sales network in Africa. Transsion recently revealed that it would build an industrial park, as well as an R&D facility in India, for phone manufacturing to Africa.
The IPO, TechCrunch says, is coming after Transsion announced its plans to go public and presented its first documents to the Shanghai Stock Exchange about four months ago.
By listing on STAR Market, Transsion will now be on China’s new exchange. This move is regarded as an extension of Beijing’s drive to become a mecca for tech startups to raise public capital.
With Chinese regulators reducing profitability requirements for the STAR Market, pre-profit ventures can now list.
Transsion’s African Engagement
The device maker’s IPO is taking place at a time during which Transsion is actually in the black. In 2018, the company realized 22.6 billion yuan ($3.29 billion) in revenue, which increased from 20 billion yuan in 2017.
According to Transsion’s prospectus, net profit for 2018 fell to 654 million yuan, down from 677 million yuan in the previous year.
In 2018, the firm recorded phone sales of 124 million units globally. It holds 54 per cent of the feature phone market in Africa via its Tecno, Infinix and Itel brands.
Further, stats from International Data Corporation (IDC) show that in smartphone sales, Transsion is second to Samsung and is ahead of Huawei.
Transsion maintains research & development centers in Kenya and Nigeria, with its sales network on the continent including retail shops in Kenya, Nigeria, Ethiopia, Tanzania as well as Egypt.
The manufacturer also gained huge traction for being among the first known phone company to optimize its camera smartphones for African spending capacity and taste.
The company’s success in building market share and identifying a sweet spot with African consumers as regards price and features makes it a major player in Africa’s booming tech space.
There is already strong mobile-phone penetration on this continent; however, the region continues to witness a conversion from basic USSD mobile phones, to feature phones, and ultimately to smartphones.
Smartphone adoption — GSMA writes in its 2019 report on Sub-Saharan Africa’s mobile economy — on the continent is low at 34 per cent; however, it is expected to grow to 67 per cent by 2025.
Opportunities Transsion’s IPO Will Offer African Markets
In addition to a rising internet profile, smartphone adoption in Africa is crucial to the tech scene in the region. In top VC and startup origination markets (the likes of Nigeria, Kenya as well as South Africa), tons of ventures are developing business models around mobile-based products & digital apps.
If Transsion’s IPO spawns better smartphone conversion in Africa, that could open up more opportunities to startups and startup, including fintech, VOD apps, and others.
Apart from this, Transsion’s IPO has the potential to generate more significant influence from China in African tech, especially as the maker is planning, more definitely, toward venture investing.
Last Month, Future Hub, sponsored by the Shenzhen company, partnered with Wapi Capital in Kenya to source and provide funding for early-stage African fintech startup firms.
The engagement of China with startups on this continent has been light in comparison with China’s deals on infrastructure & commodities. This received a further boost in recent years as China hits the gas on its Belt and Road plan.
Transsion’s going public is the second event in 2019, in the wake of Chinese owned Opera’s enterprise spending in Nigeria, showing more profound Chinese influence as well as investment in the African digital space.