The privatization offer premium is 74.8%, what does the CITIC system see in Smart Share Global for "grabbing shares"?

With a premium rate of 74.8%, shortly after the New Year bell rang, Smart Share Global (EM.US) announced that it received a privatization offer jointly issued by CITIC Capital's "Xincheng Capital" and the management team of Smart Share Global, with the latter proposing to acquire all of the company's issued common shares at a cash price of $1.25 per American Depositary Share (ADS).

According to calculations, the proposed price represents a premium of approximately 74.8% over Smart Share Global's last closing price before the announcement, and it is also higher than the company's highest price of $1.17 within 2024. This offer price indicates that external professional investment institutions recognize the investment value of Smart Share Global, while also demonstrating the sincerity of the company's management and CITIC Group in protecting the interests of secondary market investors.

In recent years, the situation of Chinese concept stocks in the U.S. capital market has become increasingly complex and subtle, with many leading companies in various industries struggling in the U.S. stock market: on one hand, overseas investors do not have a deep understanding of Chinese concept stocks, leading to many high-quality stocks being undervalued for a long time, hindering further financing potential; on the other hand, due to factors such as investor preferences, many Chinese concept stocks have low trading volumes, making it impossible to provide effective liquidity, thus rendering public trading meaningless.

From the perspective of Zhitong Finance APP, CITIC Group's joint privatization offer to Smart Share Global at a high premium is based on the view of professional investment institutions, indicating that Smart Share Global's stock price has been long undervalued and does not truly reflect the company's intrinsic value, nor can it bring positive value guidance. Choosing privatization will allow Smart Share Global to focus more on sustainable business development in the future, thereby maximizing benefits for all parties involved.

Looking at the background of the proposing investors, Xincheng Capital adds intrigue to Smart Share Global's privatization. Public information shows that Xincheng Capital is derived from the private equity investment department of CITIC Capital, known as "China's Blackstone," which is one of the earliest alternative investment institutions engaged in merger and acquisition investments in China, with star projects including McDonald's China, SF Express, Alibaba, Sina, AsiaInfo, and Focus Media. Especially in recent years, the performance of McDonald's China has demonstrated to the world how a merger fund can reignite strong growth vitality in a multinational enterprise.

From past cases, it is not difficult to find that consumption and technology are the two key areas of focus for Xincheng Capital, and Smart Share Global's positioning is precisely that of a technology consumption company. There are enough intersections in their corporate genes, and these similarities are expected to facilitate smooth cooperation between the two parties in the future.

Looking back at Smart Share Global, as a rare publicly listed company in the shared charging sector, the company operates with both stability and growth attributes. For example, in the latest quarterly financial data, Smart Share Global's revenue for the second quarter of 2024 was 463 million yuan (RMB, the same below), with a non-GAAP adjusted net profit of 15.2 million yuan, achieving quarter-on-quarter growth rates of 16.6% and 300%, respectively. Over a longer period, Smart Share Global has maintained Non-GAAP profitability for six consecutive quarters. As of the end of the second quarter of last year, the company had cash and cash equivalents, short-term investments, and restricted cash totaling 3.2 billion yuan, providing ample cash reserves to support its future development Looking ahead from the current point in time, if the privatization matter is realized, Smart Share Global is expected to save costs and expenses related to compliance for the listing of shares, which may further enhance the company's profitability; at the same time, after privatization, Smart Share Global will enjoy faster decision-making speed and greater flexibility to focus on enhancing its core competitiveness and seizing new business opportunities.

In summary, this privatization is expected to benefit all parties involved. Finally, it is worth mentioning that the offer made by Xincheng Capital and the company's management is still a preliminary non-binding proposal, and the progress of Smart Share Global's privatization will be continuously monitored by Zhitong Finance