Exclusive: U.S.-listed 111 Raises $153 Million Before Shanghai Flotation

New York-listed online health-care platform 111 Inc. completed a funding round of nearly 1 billion yuan ($153 million) as the company prepares for a divesture of its main operating unit to launch a listing in Shanghai.

The company, which provides online drug sales and health-care consultation services in China, was valued at 10 billion yuan in the latest round of funding by investors led by SAIF Partners, a China-focused private equity fund, Caixin learned from multiple sources.

The fundraising is one step forward toward 111’s plan to seek a listing on Shanghai’s tech-savvy STAR Market in a bid to tap new capital in its home market. Shanghai-based 111 debuted on Nasdaq in 2018 as the first Chinese online health-care company to trade in the U.S.

In August, 111 said it secured $420 million of investment for Yao Fang Information Technology (Shanghai) Co. Ltd., the principal operating subsidiary of 111 in China, as part of a strategic plan to list Yao Fang on the Shanghai bourse.

The company promised in the latest funding round that it would complete the Shanghai listing in three years. Otherwise, investors can ask the company to pay their investment back with 6% annual yields, sources told Caixin.

On Dec. 3, Haitong Securities submitted materials regarding 111’s STAR Market listing plan to the securities regulator in Shanghai. Haitong will serve as 111’s pre-listing tutoring and sponsoring agency.

The company debuted on Nasdaq with a variable interest entity (VIE) structure, an arrangement adopted by many overseas-listed Chinese companies to skirt Chinese rules restricting foreign ownership in certain sectors.

According to 111’s prospectus, Cayman Islands-registered 111 fully owns Yao Fang, which controls the company’s main business operations in China, including 111.com.cn.

A rising number of Chinese companies listed in the U.S. have sought alternative listings in the face of toughening U.S. rules targeting Chinese enterprises amid rising tensions. Unlike most U.S.-listed Chinese companies that seek a domestic listing after a privatization and delisting from the U.S. market, 111 is opting for divesture to list its China unit separately.

A lawyer specializing in initial public offerings said such a choice will save the company money but may dampen investment returns for smaller U.S. investors as primary profits will go to domestic investors.

“Unless the company has significant growth in business, offshore investors may see their interests affected,” the lawyer said.

The company’s American depositary receipts traded at around $6.60 each Thursday, 3.4% higher than the previous day. The stock has a market cap of $548 million.

Established in 2010 as a drug sales unit of online grocery site Yihaodian, 111 was spun off as a separate business in 2014 by founders Yu Gang and Liu Junling. In July 2015, Yihaodian was taken over by U.S. retail giant Walmart Inc.

The health-care company’s business covers supply and logistics services to pharmacies, retail drug sales to customers and online health-care consultation. As of the end of September, 111 had business partnerships with 300,000 brick-and-mortar pharmacies, about 50% of the offline pharmacies in China.

In 2019, 111 posted 121% growth in revenue to 3.95 billion yuan with a net loss of 500 million yuan, wider than the previous year. Drug supply and logistics services to pharmacies account for more than 90% of the company’s revenue.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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