Key Takeaways:

• Hesai Group’s IPO application includes Goldman Sachs, Credit Suisse and Morgan Stanley underwriting their first new U.S. listing by a Chinese company in more than a year
• A successful IPO would make the company the world’s largest listed maker of light detection and ranging (LiDAR) technology used in self-driving vehicles

By Doug Young

The one-month window between the western and the lunar new years is usually a dead period for Chinese IPOs, as many candidates choose to make such listings when investors return to work after the two major holidays. But this year is shaping up quite differently, as a backlog of companies scramble to get to market in a climate that has suddenly become favorable after a pause of more than a year.

The two new applications follow another major one that we wrote about earlier this week from adult education firm QuantaSing, which featured investment banking majors Citigroup and CICC sponsoring their first new Chinese IPO application in the U.S. in more than a year. That deal was set to raise up to $44 million.

No fundraising target was given on Hesai’s application, though we suspect the amount will be quite a bit larger, perhaps as high as $300 million, based on reasons we’ll give shortly. Similar to the QuantaSing listing, Hesai’s IPO also features the first appearance by investment banking majors Goldman Sachs, Credit Suisse and Morgan Stanley as underwriters for a new U.S. IPO by a Chinese company in more than a year.

The presence of three such major names on a single listing partly explains our thesis of why this IPO could be quite large, since smaller listings would typically have just a single underwriter.

The bigger backstory is that U.S. IPOs by Chinese firms came to a near halt in July 2021, as regulatory issues in both China and the U.S. cast a major cloud of uncertainty over the future of such listings. Two of the biggest issues were purely Chinese, one involving data security and the other involving generally tighter government oversight of all Chinese companies. Both of those issues have now been largely resolved, clearing the path for listings to resume.

The other major issue was a dispute between the Chinese and U.S. securities regulators over the latter’s access to audit data on New York-listed Chinese companies. That dispute was also largely resolved with the signing of a new agreement in August and a successful test inspection that wrapped up in November.

New leader

Hesai’s story certainly looks interesting, with the company billing itself as the world’s largest maker of light detection and ranging (LiDAR) systems, which use light to determine the location of objects in self-driving cars. The company says that 12 of the world’s largest autonomous driving companies were using its products as their primary LiDAR solutions at the end of 2021, giving it about 60% of the market that year.

In terms of actual customers, the company lists three Chinese names, electric vehicle maker Li Auto (LI.US; 2015.HK); China-owned British sports car maker Lotus and a company called Jidu, as its largest ones. That indicates Hesai is still very much dependent on its home China market.

Based on those three companies’ revenues, Hesai indeed looks like the industry leader. The company posted revenue of 721 million yuan ($106 million) in 2021, up 73% from the previous year. Revenue grew another 73% year-on-year in the first nine months of 2022 to 793 million yuan. On an annualized basis that would give the company about $156 million in revenue last year, or triple the level of the other three companies.

Hesai is losing money, reporting net losses of 245 million yuan in 2021 and 165 million yuan in the first nine months of last year.

The company previously filed an application to raise 2 billion yuan in a listing on China’s domestic STAR Market in 2021, though it later withdrew the application. Still, that amount also suggests Hesai may try to raise $200 million or more in this latest listing attempt.