The founders of Juwai, China’s largest international property portal cashed out, and for not nearly as much money as you would have guessed. The announcement was made just three weeks after Chinese citizens face new rules restricting foreign real estate purchases. Now industry insiders are scrambling to figure out if the market’s growth is tapering, or if other investors sought to secure stronger interest in the company ahead of a public offering.
Juwai Founders Exit
The two Ozzie founders exited 6 years after founding the company. Andrew and Simon took a category that barely existed in 2011, and blew it up into a headline business. Not a lot is expected to change from management, since CEO Charles Pittar will still be at the helm. Existing investors were the buyers of the founders’ equity, so new money isn’t expected to influence operations either.
Valued The Company At $50 Million
The exit comes at an interesting time, since it’s ahead of a previously announce plan for an initial public offering (IPO) later this year. The sale of founder equity placed a $50 million valuation on the company. $50 million sounds like a lot of cash, but it’s less than a week’s worth of sales of detached homes in Toronto or Vancouver. This is an interesting number, because it may show the scale of the company is much smaller than the industry had thought. We contacted Juwai, but they declined to comment on whether this impacts their goal of an IPO later this year.
To contrast, let’s look at the Australian Stock Exchange (ASX) small caps and IPOs. The bottom 100 of the ASX small caps have an average valuation of $155 million, more than 3x the valuation of Juwai. Recent IPOs on the ASX are priced at a much lower $19 million market cap. The IPO scene in Australia seems a little soft at this time.
Changes In Business or Soft IPO Market
Now the sale being announced comes around two interesting events for the company – a massive partnership deal, and new rules for capital controls. In December the company announced a deal to run the international real estate portal for China’s largest company, Tencent. This is a pretty important deal, because it opens up the market to a massive new audience of Mainland Chinese looking for international property. With all those new potential users, the deal should have sent the valuation soaring.
Just 20 days before the owners announced they had sold, China released new capital controls prohibiting the exchange of capital for real estate purchases. It’s kind of hard to sell international property to people that don’t have access to large amounts of capital to actually buy property. The issue will probably sort itself out over the next few years as the yuan gains liquidity, but it doesn’t exactly provide an ideal marketplace for the company at the moment.
In no way is this a critique of Juwai’s business operations, or even the owners timely exit. However, it does finally give an idea of the scale, and optimism of Mainland Chinese buyers in the international marketplace going forward. Which doesn’t seem nearly as big as it was thought to be in the past.