OneConnect, the Chinese AI and blockchain technology startup, has filed for a $100 million U.S. IPO of American Depositary Shares. The funding amount is significantly lower than the $1 billion rumored by Reuters in May.
The firm is a spin-off from China’s second-largest insurer, Ping An. The startup had revenues of $198 million in 2018, rising to $218 million in the first three quarters of 2019. However, it made losses of $111 million and $126 million respectively.
Last year OneConnect was valued at $7.5 billion after a Series A investment round that raised $650 million including from the likes of Japan’s SoftBank and SBI Holdings.
The prospectus outlines the corporate structure. At the top, OneConnect Financial Technology is incorporated in the Caymans. The Chinese mainland activities are owned by Hong Kong companies which are in turn subsidiaries of organisations domiciled in the Caribbean.
While the firm encompasses numerous technologies, it sees itself as an AI company first and foremost. It quotes some significant statistics. OneConnect counts all of China’s major banks as clients, 99% of its city commercial banks and 46% of its insurance companies, amounting to more than 3,700 institutional users.
To date its systems have supported transactions amounting to $0.3 trillion to its client’s end customers. That matters because in 2018 77% of its revenues were transaction-based such as for loans generated, claims processed, databases queried and API usage.
In terms of blockchain, three months ago the firm published a whitepaper outlining the importance of interoperable blockchains. In China, it has its One Enterprise Chain supply chain finance platform. It also partnered with the Hong Kong Monetary Authority for its eTradeConnect blockchain trade finance platform. And with parent Ping An it has rolled out smart legal contracts.
In the run-up to the IPO OneConnect set up an office in Singapore. Through an arrangement with SBI Holdings, it’s extending its presence in Japan. In the Philippines, it has a partnership with UBX the subsidiary of the Union Bank of Philippines where its also rolling out a supply chain finance solution. Additionally, it has expanded into Malaysia, Thailand, Cambodia and Vietnam. To extend its activities into Europe, OneConnect also partnered with German firm finleap which shares common investors in Ping An and SBI Holdings.
OneConnect stated that the listing will either be on the NYSE or Nasdaq. The IPO is being underwritten by several banks. Morgan Stanley, Goldman Sachs (Asia), JP Morgan, Ping An Securities, BofA Securities, HSBC, CLSA and KeyBanc Capital Markets.
