China: Zhongchao Medical sets terms on Nasdaq IPO

The initial public offering of Shanghai-based healthcare website Zhongchao Medical Technology is still to emerge. One of the leading consumer brands in China’s healthcare training and education sector, it is looking to raise US$15m on Nasdaq.

Founded in 2012, the company provides proprietary interactive programs via practice improvement.

In mid December, it set terms for the IPO. It is to sell 3.5 million shares at a price range of US$4.00 to US$4.50. If it prices at the midpoint, this would give it a market cap of US$107m.

Zhongchao Medical had profits of US$1.7m on revenues of US$7m for the first six months of last year.

But there is some scepticism about valuations that may be as much of a factor as market conditions as to why it is yet to emerge.

In a report published at the end of last year, Saint Fleur Investment Research reckons that the deal is overvalued and calls it “expensive”.

Its significant criticism surrounds the company’s equity structure. It points out that Zhongchao has two types of share classes: class A and B. Each class A share gets one vote, while each class B share is entitled to 15 votes. “Due to this equity structure, more than 84% of the total amount of voting power given by class B shares is owned by directors,” it said.

More than 50% of the company will reside with founder, chairman and chief executive Weiguang Yang.

Network 1 Financial Securities is sole bookrunner on the deal.