IPO Launch | 4Paradigm begins its offering today, with an expected listing on September 28

Futu News reported on September 18,$PHANCY (06682.HK)$The offering will take place from September 18 to September 21, 2023, with a proposed issuance of 18.396 million shares, including 1.8396 million shares for public offering and 16.5564 million shares for international offering. The per-share offering price is between HKD 55.6 and HKD 61.16, with each lot consisting of 100 shares. It is expected to be listed on September 28.

Source: Disclosure Yi

Company Overview

Fourth Paradigm is an artificial intelligence software company and a leader in enterprise AI, focusing on providing platform-centric AI software that enables enterprises to develop their own decision-making AI applications. The company’s enterprise-level solutions are designed to serve businesses rather than individuals, offering platform-centric AI solutions that allow enterprises to achieve rapid large-scale AI transformation, uncover hidden patterns in data, and comprehensively enhance corporate decision-making capabilities.

In August 2020, Fourth Paradigm officially launched Sage AIOS, an upgraded and integrated artificial intelligence operating system. Sage AIOS is an AI operating system with a user-friendly interface, standardized data processing, automated resource management and configuration, and full compatibility with middleware, comparable to a personal computer operating system.

In June 2021, the company launched an enterprise-level AI application store, a marketplace for AI applications where users can choose from various options. Fourth Paradigm integrates algorithms and standards used by the company and its ecosystem partners, as well as a series of AI applications developed on Sage AIOS, easily meeting users' needs for intelligent operations across different application scenarios.

Fourth Paradigm’s solutions have created value for enterprises across various industries, including but not limited to: finance, retail, manufacturing, energy and power, telecommunications, transportation, technology, education, media, and healthcare.

Financial Overview

In terms of financial performance, during the record period, Fourth Paradigm achieved very rapid growth, with revenue increasing by 114.2% from RMB 942 million in 2020 to RMB 2.018 billion in 2021, and further growing by 52.7% to RMB 3.083 billion in 2022.

The company's revenue for the three months ended March 31, 2023, increased by 33.6% from RMB 482 million for the three months ended March 31, 2022, to RMB 644 million, primarily due to an expanding user base and increased user spending, driving higher revenue from application development and other services.

Consistent with its revenue growth, Fourth Paradigm's trade receivables (including those aged over six months) also increased. As of December 31, 2020, 2021, 2022, and March 31, 2023, its trade receivables were RMB 263 million, RMB 778 million, RMB 1.493 billion, and RMB 1.494 billion, respectively.

Source: Disclosure Yi

Industry Overview

Among the pioneers of applied artificial intelligence, China’s market is highly active, currently leading the global AI industry with innovations that constantly push boundaries and rapidly emerging AI breakthroughs. China’s AI industry can be divided into four major categories based on application areas: decision-making AI, visual AI, speech and semantic AI, and AI robotics.

According to the CIC Report, China's artificial intelligence expenditure reached RMB 225.5 billion in 2022 and is expected to grow to RMB 691 billion by 2027, with a compound annual growth rate of 25.1%. Decision-making artificial intelligence is expected to become the fastest-growing category. In 2022, the expenditure scale of China's decision-making artificial intelligence market reached RMB 53.2 billion, and it is expected to grow to RMB 210.4 billion by 2027, with a compound annual growth rate of 31.7%.

Source: Disclosure易

According to the CIC Report, in 2022, in terms of revenue, Fourth Paradigm was the largest platform-centric decision-making artificial intelligence provider in China.

Cornerstone Investor

Regarding cornerstone investors, multiple cornerstone investors have agreed to subscribe for the available number of placement shares at the offer price, totaling approximately HKD 758 million (assuming an offer price of HKD 58.38, the median of the indicative offer price range). Cornerstone investors include Xinhua Capital Management, Beijing Zhongguancun, and Montage Holdings.

Use of Proceeds

In terms of fund-raising use, the company expects to raise net proceeds of approximately HKD 885 million from the global offering (assuming the over-allotment option is not exercised, and the per-share offer price is the median of the offer price range at HKD 58.38).

According to the prospectus, Fourth Paradigm intends to allocate the net proceeds from the share offering as follows: approximately 60% will be allocated over the next three years to strengthen the company’s fundamental research, technical capabilities, and solution development; approximately 20% will be allocated to expand the company’s product offerings, build its brand, and enter new industry sectors; approximately 10% will be allocated over the next three years to seek strategic investment and acquisition opportunities to implement long-term growth strategies, develop solutions, and expand and penetrate the vertical industries covered by the company; and approximately 10% will be used for general corporate purposes.

Editor/Danial

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