Shares of Wowo Ltd ($WOWO) went public in April 2015 at $10 and sold a paltry 4M shares, then proceeded to trade lower, never really getting back above issue price at $10. They reported earnings today: they’re now 12% higher at $9.60, and finally may reward the shareholders who stuck around to see if the company can execute. This was the first reporting period for the company, and it’s a good sign that they are able to deliver out of the gate. All companies are on this 90 day clock, and new IPO’s are under a higher level of scrutiny until the management team gains some credibility from analysts and report numbers they think they can deliver.
Wowo is a small company with a $175M valuation, and they reported net revenues for the fourth quarter of 2014 at $9.4 million, an increase of 9.4% in the same quarter of 2013. Net revenues from store front fees in the fourth quarter of 2014 increased by 46.4%. The percentage of net revenues from storefront fees increased from 37.6% in the fourth quarter of 2013 to 50.4%, and any manager looking at this growth understands that continuing storefront fee growth is the keyto getting stock prices back above the $10 issue price.
Wowo Limited provides online group buying services and storefront services in China. The company operates third-party e-commerce platforms that focus on local entertainment and lifestyle services, such as restaurants, movie theaters, and beauty salons. Much like Yellow Book (an online spinout of Yellow Pages) its platform allows local merchants to customize and manage their online stores, make direct sales to their target customers, and process online sales for consumption at their brick and mortar stores.
China’s First Publicly-Traded Local Lifestyle Service
Mr. Maodong Xu, Chairman and CEO of WoWo Limited commented, "We were pleased to report strong fourth quarter results. We are making excellent progress growing our merchant base and ramping up monetization as our merchants have embraced the implementation of the one-stop shopping experience upgrade we rolled out in the third quarter of 2014.
In April 2015, WoWo successfully completed its IPO on Nasdaq, becoming one of the first publicly-traded China-based companies focused on local lifestyle service ecommerce to be listed in the US markets. We believe our US listing can enhance our brand recognition, expand our merchant and user base, attract employee talent, and increase the confidence of our current and future business partners."
CEO Maodong Xu stopped short of giving guidance, but investors acted like he did guide higher this morning driving shares up double digits, but more importantly, Wall Street likes to see and hear from the management team and know they pass the eye test for quarterly earnings. This is what it will take for WOWO to trade back above its IPO price and higher.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer