IPO Applicant Lemo Faces Cash Squeeze And Credibility Questions
The operator of massage chairs in public spaces is making a renewed pitch to investors amid a lingering controversy about its business data
Key Takeaways:
The firm deploys massage chairs in malls and transport hubs but more than 80% of its machines are located in cinemas, with lower usage rates
A recent report in a state-run securities journal cast doubt on the number of its massage chairs in operation
They have become a familiar sight in China's crowded shopping malls and transport hubs: rows of bulky mechanized chairs offering an affordable, automated massage for the weary shopper or commuter.
Users may welcome the opportunity for some stress relief, while others complain the machines are invading public spaces and are even replacing standard seats in cinemas. But what can the massage chairs offer investors?
A leading provider of massage chairs at commercial locations, operating under the Lemobar brand, wants to give equity investors an opportunity to buy into its business by listing its shares on the Hong Kong stock market.
The company, Fujian Lemo IoT Technology Co. Ltd., is making a second IPO attempt after an initial filing in January lapsed. This time, however, the firm may have to override doubts that have emerged about the scale and sustainability of its business.
In the filing to the Hong Kong Stock Exchange,Lemodescribed itself as China's leading provider of automated massage services with more than 535,000 mechanized chairs deployed across the country, administered directly by the company or through local partners.
Although commercially operated chairs have visibly proliferated, they still make up a fraction of China's overall market for massage services, which remains dominated by hands-on therapists.
A study cited in the prospectus found that mechanized massage was worth 2.7 billion yuan ($376.1 million) in China last year, representing just 0.5% of an overall market valued at 536.2 billion yuan. However, the automated niche is highly concentrated among a handful of providers, giving Lemo a market share of nearly 43% last year, according to the IPO ...
