Investors are putting pressure on a Chinese UV protective gear maker valued at $3bn to downsize its planned listing in Hong Kong over concerns that the company’s advertising-heavy business model is unsustainable.
Beneunder Limited, a Sequoia China-backed company that produces outdoor wear, has built its success by tapping into some consumers’ desire for fairer skin. It filed for a listing in April.
But the company has recently come under scrutiny after the official newspaper of the Chinese Communist party, People’s Daily, accused it in June of exaggerating its technological prowess and ploughing money into advertising.
Investors are pressuring the company to halve a $3bn valuation it hit after raising $46mn in a Series C financing round this year, said people familiar with the matter.
“Beneunder’s price/earnings ratio is much higher than that of Lululemon and Uniqlo,” a person said, suggesting the company was overvalued.
The company is expected to raise about $200mn to $300mn in an IPO, which may happen in the second half, according to the people.
Beneunder did not reply to a request for comment.
The company invested Rmb71.6mn ($10.6mn) in research and development in 2021, 3 per cent of its annual revenue, a prospectus showed. Its marketing expenditure was Rmb586.4mn, accounting for 24 per cent of the start-up’s gross sales.
Beneunder said that in 2021 it had collaborated with more than 600 influencers, who helped the brand generate a total of 4.5bn page views.
Since being founded in 2013 by engineering graduates Ma Long and Lin Ze, the company has launched an array of products targeting urban women who do not want a tan.
The company posted a sun hat advertisement on its official Douyin account in July which read: “If you protect yourself from the sun, you will be whiter than others. If not, you will be uglier.”
In recent years, Beneunder has enlisted China’s top celebrity live streamers to promote its signature product, an umbrella with sun-protective fabric.
Austin Li, once one of China’s biggest ecommerce influencers before vanishing after appearing to make a Tiananmen Square tank reference, endorsed Beneunder’s umbrellas, jackets and sun hats during live streams, describing them as “essentials”.
One banker working on the deal said the products appeared to run against Beijing’s “common prosperity” policy, which aims to reduce social inequalities and rein in “excessive incomes”.
Mark Tanner, managing director of China Skinny, a Shanghai-based marketing and research agency, said that in order to appear in line with Beijing’s common prosperity policy, Beneunder could adjust the focus of its narrative to concentrate more on health instead of beauty.
“They need to be very careful in the way they pitch their business,” said Tanner.
The company has worked to diversify beyond sun protection. Last year, sales of UV protective gears contributed 79.4 per cent of its overall revenue, down from 99.3 per cent in 2019.
