F-1/A: Zhibao Technology Inc. Files for $7.2 Million IPO on Nasdaq

Zhibao Technology Inc., a Cayman Islands-based InsurTech company, is seeking to raise capital through an initial public offering of 1,200,000 Class A ordinary shares, with an expected price range of $4.00 to $6.00 per share.

Summary

• Zhibao Technology Inc., a Cayman Islands holding company operating primarily in China, has filed for an IPO to list its Class A ordinary shares on the Nasdaq Capital Market under the ticker symbol ZBAO.
• The company is offering 1,200,000 Class A ordinary shares, with an anticipated initial public offering price between $4.00 and $6.00 per share.
• Zhibao operates through its PRC Subsidiaries, focusing on digital insurance brokerage services using a 2B2C model.
• The company has applied for and completed a cybersecurity review with respect to its proposed overseas listing pursuant to the Cybersecurity Review Measures (2021 version).
• The company has completed the filing procedures with the CSRC under the Trial Measures.
• The company's revenue reached approximately RMB 142.1 million (US$19.6 million) for the fiscal year ended June 30, 2023, representing an increase of approximately RMB 33.9 million (US$4.7 million), or 31%, from approximately RMB 108.2 million (US$16.2 million) for the fiscal year ended June 30, 2022.
• For the fiscal year ended June 30, 2023, the company incurred a net loss of approximately RMB 43.1 million (US$5.9 million), including RMB 54.7 million ($7.5 million) in share-based compensation expenses.
• The company intends to use the net proceeds from the offering for R&D, developing new insurance solutions, establishing a Lloyds syndicate, sales and marketing, business expansion, and working capital.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While the company shows revenue growth and a leading market position, it also reports a net loss and faces regulatory and operational risks associated with operating in China. The sentiment is neutral to slightly positive.

Positives

• The company's revenue increased by 31% year-over-year, reaching approximately RMB 142.1 million (US$19.6 million) for the fiscal year ended June 30, 2023.
• The company has a strong market position in the 2B2C digital insurance brokerage services sector in China.
• The company has developed over 40 proprietary and innovative digital insurance solutions.
• The company has partnered with over 90 insurance companies.
• The company has completed the required procedures with the CSRC and the Cybersecurity Review Office (CRO).

Negatives

• The company incurred a net loss of approximately RMB 43.1 million (US$5.9 million) for the fiscal year ended June 30, 2023, although this includes a one-off expense of RMB 54.7 million ($7.5 million) in share-based compensation.
• The company is subject to regulatory risks associated with operating in China, including uncertainties in the interpretation and enforcement of PRC laws and regulations.
• The company is dependent on key insurance companies and B channels, and the loss of these relationships could adversely affect the business.
• The company has identified a material weakness in its internal controls over financial reporting.

Risks

• The company's Class A ordinary shares may be delisted under the HFCA Act if the PRC adopts positions that prevent the PCAOB from inspecting the company's auditor.
• Changes in political and economic policies of the PRC government or in relations between China and the United States may materially and adversely affect the company's business.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to the company.
• The PRC government exerts substantial influence over the manner in which the company conducts its business activities.
• The company's business processes a certain quantity of personal information, and failure to protect private or sensitive information of customers or improper handling of such information could have a material and adverse effect on the company's business.
• The CSRC has recently released the New Overseas Listing Rules for China-based companies seeking to conduct overseas offering and listing in foreign markets, effective as of March 31, 2023.
• The company is dependent on key insurance companies on the supply of insurance products to its end customers, the loss of which could adversely affect its business.
• The company is dependent on its B channels to reach end customers. Failure to acquire new B channels or retain existing B channels in a cost-effective manner, its business, financial condition and results of operations may be materially and adversely affected.
• The innovative insurance technology and infrastructure the company uses to optimize its insurance solutions require continuous developments and upgrades. The company cannot assure you that these technologies will fully support its business.
• The regulation on the requirement of a company to make a filing on internet information service in China is subject to interpretation, and the company's operation of digital insurance broker services could be harmed if it is deemed to have violated applicable laws and regulations.
• If the company is unable to attract, incentivize and retain talented professionals, its business, financial condition and results of operations may be affected.
• The company is subject to governmental regulations and other legal obligations related to privacy, information security, and data protection, and any security breaches, and its actual or perceived failure to comply with its legal obligations could harm its brand and business.
• Zhibao has identified a material weakness in its internal controls over financial reporting. If Zhibao does not adequately remediate this material weakness, or if it experiences additional material weaknesses in the future or otherwise fails to maintain effective internal controls, it may not be able to accurately or timely report its financial condition or results of operations, or comply with the accounting and reporting requirements applicable to public companies, which may adversely affect investor confidence in Zhibao and the market price of its shares.
• There is no active trading market for the company's Class A ordinary shares and there can be no assurance any market will develop or that the trading price will not decline below the price paid by investors.
• Nasdaq may apply additional and more stringent criteria for the company's initial and continued listing because it plans to have a small public offering and insiders will hold a large portion of its listed securities.
• The trading price of the company's Class A ordinary shares may be volatile, which could result in substantial losses to investors.
• Certain recent initial public offerings of companies with public floats comparable to the company's anticipated public float have experienced extreme volatility that was seemingly unrelated to the underlying performance of the respective company. The company may experience similar volatility, which may make it difficult for prospective investors to assess the value of its Class A ordinary shares.
• Chief Executive Officer and Chairman of the board of directors, Mr. Botao Ma, has a significant influence over the company. His interests may not be aligned with the interests of the company's other shareholders and he could prevent or cause a change of control or other transactions, which may cause a material decline in the value of the company's Class A ordinary shares.

Future Outlook

The company intends to grow its business by expanding its B channels, increasing its sales force, driving additional conversions for existing end customers, upgrading its digital insurance solutions and PaaS, expanding its MGU business, and exploring M&A opportunities.

Management Comments

• The management team is passionate about innovation in providing digital insurance solutions to end customers.
• The management team has extensive experience in Chinas insurance market; in particular, our teams expertise in the insurance brokerage industry will help steer the Company to continuously maintain and extend our leading position in the digitalization of the insurance brokerage industry in China.

Industry Context

The company operates in the growing digital insurance brokerage services industry in China, which is expected to reach approximately RMB 6.2 billion in 2027, with an estimated CAGR of approximately 50.1% from 2022 to 2027.

Comparison to Industry Standards

• According to the Frost & Sullivan Report, Zhibao China Group ranked number one in the 2B2C digital insurance brokerage services sector in China, with a market share of approximately 17.4% and a revenue of approximately RMB140.6 million in 2022.
• The company's 2B2C digital embedded insurance model is considered innovative and is expected to shape the future of the industry.
• The company's advanced technology platform, including its PaaS, is a key differentiator in the market.

Legal Proceedings

• Sunshine Insurance Brokers filed a lawsuit against Hengbang Property Insurance Holding Co., Ltd Suzhou Branch, seeking repayment of insurance brokerage commission fees of approximately RMB 1.62 million, together with a penalty of RMB 67,084.
• Wuhan Wubao Technology Co., Ltd. filed a lawsuit against Sunshine Insurance Brokers and Mr. Jian Liu, a business partner of Sunshine Insurance Brokers, in connection with copyright infringement and unfair competition.

Related Party Transactions

• The company purchases certain services on insurance purchase and claim assistance from Shanghai GBG Enterprise Management Consulting Co., Ltd., an affiliate of Mr. Botao Ma.
• The company has borrowings from and repayments to related parties, including Mr. Botao Ma and Mr. Yuanwen Xia.
• The company made loans to and received repayments from related parties, including Ningbo Shenan Enterprise Management Center LLP and Shanghai Shenbao Enterprise Management Center LLP.
• The company made payments on behalf of Mr. Botao Ma.
• The company issued ordinary shares to Shanghai Xinhui Investment Consulting Co., Ltd., a related party controlled by Mr. Botao Ma.

Stakeholder Impact

• Shareholders: The IPO will provide an opportunity for investors to participate in the growth of the company, but also carries risks associated with market volatility and regulatory uncertainties.
• Employees: The company's growth plans may create new job opportunities, but also require ongoing training and development.
• Customers: The company's focus on innovation and customer service aims to provide better insurance solutions and a more convenient experience.
• Insurance Companies: The company's partnerships with insurance companies provide them with access to a wider customer base and specialized services.
• B Channels: The company's partnerships with B channels provide them with value-added services to offer to their end customers.

Next Steps

• The company is seeking to list its Class A ordinary shares on the Nasdaq Capital Market under the ticker symbol ZBAO.
• The company intends to use the net proceeds from the offering for R&D, developing new insurance solutions, establishing a Lloyds syndicate, sales and marketing, business expansion, and working capital.

Key Dates

Keywords

insurance, brokerage, digital, 2B2C, IPO, Zhibao, China, InsurTech, Nasdaq, offering