Banking & Finance

Cloudy outlook

Moji app’s IPO plans thwarted

weather

When information technology giant IBM announced that it was buying the digital assets of The Weather Company in 2015, some onlookers wondered why. What they didn’t realise was that the deal, valued at around $2 billion, would help Big Blue tap into a range of industries that depend on accurate information on the weather to maximise their profits. Think insurance, agriculture, pharmaceuticals and public utilities, for instance. And by supplying some of the most searched-for items of weather data, the service also harvests information on its customers’ locations through its mobile app, enabling sales to advertisers (this particular practice has now become a subject of a lawsuit by the Los Angeles city government).

The Weather Company’s biggest counterpart in China is Moji. However, the crowd-sourced real-time information provider has hit a hurdle in its own financial transformation, failing to get approval for its Rmb339 million ($56 million) initial public offering on the A-share market, despite three years of preparation.

According to Securities Times, regulators rejected the Beijing-based company’s case on a number of grounds. Topping the list was its undiversified business model, which relies on advertising for a whopping 99% of its income. Additionally many of its main clients are affiliated to its major shareholders, such as Alibaba and Tencent.

Sales here mean selling banner space on its own website and mobile app and, to a lesser extent, selling forecasts to media and internet companies that display the weather information. The model has helped Moji to report a sixfold increase in operating income and a 32-times jump in net income between 2014 and 2017, reaching Rmb311 million and Rmb62.5 million respectively. But the problem is that Moji has limited bargaining power to push back against many of its advertisers – problematically so for those that want to disseminate information that isn’t compliant with industry rules. In one instance, the China Securities Regulatory Commission pointed out that Moji was displaying drug promotions without the relevant licences and allowing unauthorised video streaming and gaming programmes on its platforms.

Since 2014 the company has been trying to expand its revenue streams by selling air quality sensors and purifiers. But the hardware unit was disbanded in 2018. “A lot of products just couldn’t be sold but stacked up in inventory,” an insider told Beijing Business Today.

If Moji misses the current window for its IPO, it could get harder to go public because of a declining pool of users. In the 12 months to June, Moji’s monthly active user base declined 11% to 146 million.

In a year in which IPO approvals have picked up to their fastest pace since 2017, Moji’s failure is telling. Yet while the technology and telecommunication sector made up the largest source of IPO fundraisings (as of the third quarter), at least 13 applications to list on Shanghai’s new STAR board (see WiC461) have also been cancelled. Often applicants couldn’t solve the queries of the regulator on their business models or financial data, 21CN Business Herald reports.

For example, Papaya Mobile withdrew its deal when it was unable to prove that its business is centred on Big Data computing, as opposed to selling ads. In fact, the top four new A-share listings this year all belong to so-called old-economy industries. These include China General Nuclear Power’s Rmb15 billion IPO (see WiC464) and China Railway Signal and Communication’s Rmb10.5 billion offering.


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