Chinese Insurance Tech Startup Cheche Group Mulls US Listing through SPAC
Following the listing of Waterdrop on the NYSE in 2021, nearly two years later, another Chinese insurance technology company, Cheche Group, announced that it would complete its listing in the United States within this year. The company signed a business merger agreement with Prime Impact Acquisition I, a special purpose acquisition company, on January 29, and will complete the backdoor listing in the third quarter of this year. Once the listing procedures are complete, the company’s ticker symbol will be changed to “CCG”.
Cheche Group was established in 2014 and is headquartered in Beijing where it has an R&D center along with a second facility in Guangzhou. Its main investors include Tencent, Shunwei Capital, China Broadband Capital (CBC) and other institutions. iiMedia’s report showed that Cheche Group is already the largest independent automobile insurance service technology platform in the Chinese market. The company’s unaudited annual income in 2022 was about 2.5 billion yuan ($370 million). During the same period, the platform’s total transaction premiums reached 15.2 billion yuan, a year-on-year increase of 36%.
Regarding the listing plan, Zhang Lei, founder of Cheche Group, said. “In the future, we will see that China’s insurance market and its digitalization will continue to grow rapidly. Among them, auto insurance is still the largest sector in China’s property insurance market, and China’s auto insurance market is the second largest in the world. It is estimated that the total premium of auto insurance will reach about 1.1 trillion yuan by 2026.”
According to the announcement, the pre-investment equity value of Cheche Group is around $760 million. After the proposed merger transaction, the new company will be valued at about $841 million. The transaction is expected to bring in about $68 million in total revenue to the company while still leaving open the possibility for additional financing.
Mark Long, co-founder, co-CEO and CFO of Prime Impact, said, “The transaction created an implied pro forma enterprise value of about $841 million. Considering the company’s technical capabilities, huge potential market, SaaS products and business model that is expected to achieve significant growth, this is still an attractive price.”
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It is quite common for companies wanting to list on a US stock exchange to replace a traditional IPO with a SPAC instead. SPAC, in essence, is the process of acquiring an unlisted target company through a merger, share purchase, share exchange, asset acquisition, reorganization and other forms within a specified time (usually 2 years) after the initial public offering of funds by a shell company without any actual business operations.
According to the statistics of SPAC Analytics, as of the end of November 2022, 552 companies in the United States had completed listings through a SPAC deal, and the proportion of fundraising done through a SPAC deal compared to all types of fundraising increased from 19% in 2019 to 68%.