• IPO Watch

Chinese drone maker DJI has sky high aspirations

Rumours of a stock market debut have long swirled around Chinese drone maker DJI, but now it appears the firm is making meaningful moves towards a 2019 IPO.

The company has managed to snatch a whopping 70% of the global consumer drone market in the 12 years it’s been in business and is now in talks with investors to raise up to $800m in investment. The cash will be used to expand DJI’s business-to-business offering, with the company currently eyeing up the agriculture, construction and energy sectors as potential targets for its automated drone technology.


Expected valuation of DJI post projected raise

If successful, the raise will see DJI’s valuation hit $15bn – almost double its 2015 valuation of $8bn – putting it in a healthy position for a public offering next year. It’s expected to launch on either the Hong Kong or a mainland Chinese exchange.

Enthusiasm for Chinese technology stocks has been buoyant in recent years. In 2014 Alibaba, China’s answer to Amazon, made a splash with its record-making debut on the New York Stock Exchange. The company raised $25bn, with stocks priced at $68 a piece, making it the largest IPO ever. Since floating, the company’s valuation has more than doubled, reaching $542bn in June 2018.

More recently, in May 2018, online doctor platform Ping An Good Doctor went public in Hong Kong, raising $1.12bn, while Didi Chuxing, China’s answer to Uber is also expected to float in 2018.

"The combined valuation [of these companies] could reach up to $1tn." | John Hall, JP Morgan.

Analysts are anticipating more announcements from Chinese companies making forays on the public markets in the next 24 months. John Hall, global head of technology services at bank JP Morgan, told the South China Morning Post that he expects to see a record amount of trades to take place on the Hong Kong Stock Exchange as a result. ‘The combined valuation [of these companies] could reach up to $1tn,’ he said.

Shenzhen based DJI was founded by Hong Kong University student Frank Wang in 2006, and has become a world leader in the $17bn unmanned aerial vehicle market. Initially focusing on consumer technology, having launched the popular Mavic Air and the more affordable Spark model drones, the firm is now working on expanding its enterprise offering. In March 2018, DJI announced that it would allow third parties to create applications on its platform, essentially creating an open API.

In 2015, the company raised $75m from West Coast venture capital firm Accel Partners. It also counts Sequoia Capital, the Silicon Valley firm which has previously made investments in Apple, Paypal and Instagram, among its backers.

The drone space is fast becoming a winner takes all market. Despite overall investment in drone tech falling in 2016, DJI hasn’t been fazed. Indeed, it’s seen profits triple year on year from 2009 to 2014, and has become a formidable force in the consumer drone market. In January 2018, action camera maker GoPro shuttered its drone programme ‘Karma’, having found itself unable to compete with DJI. Lily, another drone manufacturer, wound up its business in January 2017, after it was unable to raise enough funding to defend its market position.

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