It looks like Creality is a big step closer to its IPO.
The IPO, or “Initial Public Offering”, will transform the company into a publicly traded operation. You will be able, at some point soon, to buy and sell Creality shares on an exchange.
But they’re not quite there yet.
What exactly happened? On May 11, it was announced that the company’s proposal has passed the Hong Kong Exchange’s (HKEX) hearing stage. This means that it moves the IPO process toward the final marketing/offering phase.
How close are we to seeing the company going public? Some outlets are reporting that they expect the listing to appear this month. So it is likely very close.
However, we still don’t know all that much about the offering. We don’t know how many shares will be for the initial sale, what the pricing would be, nor the percentage of the company that is being made public. But that will all come out later before the IPO happens.
This appears to move the process to almost the final step, after having been begun way back in 2023. IPOs are usually very long, expensive paperwork exercises, and it seems that Creality decided to go through all that work.
But why? The reasons are pretty straightforward, financially. Essentially, Creality will be allocating a chunk of its private shares, for example, 20%, and putting them up for sale on an exchange. This share sale would net the company a massive amount of cash, which they could use for any purpose.
They might decide to spend it on research and development to create new products to compete in the market. They might decide to spend it on marketing to raise awareness of their products. They could expand their sales and distribution networks into areas not currently served. They could acquire other companies with complementary technologies they could incorporate into their own products.
Or they could do all of the above.
IPOs are quite powerful, as you can see. But there is also a dark side.
As a public company, they are then obligated to perform regular reporting and disclosure of information that may affect the stock price. This is only fair for shareholders and investors that otherwise would have no knowledge of what’s going on in the company they partly own.
But that reporting affects the stock price. Bad news drives down the valuation, good news raises it. Many public companies have management tied (via large bonuses) to achieving specific stock price targets. This can lead to unexpected behaviour, especially to avoid stock price drops, which could erase a big bonus. Basically, public companies tend to be more risk-averse than a private company because of this effect.
So while we may see Creality end up with a mountain of R&D cash, they may not be quite as aggressive on products as we’ve seen in the past.
But who knows, maybe they will be different.
Via Futunn
