Honor IPO?
Last week we mentioned that a group of 14 US House of Representatives Republicans sent a letter to the Department of Commerce requesting that Honor (pvt), a spin-off from Huawei, be included in the DOC’s ‘entity’ list of companies with whom suppliers must petition the US government to receive a license to trade, which in most cases is not granted. According to a financial institution in Hong Kong, Honor sent a letter to its core dealers indicating that it may be listed in the near future and those dealers can purchase original shares. According to the source, the subscription ranges from 5m yuan ($772,300 US) to 50m yuan $7.72m US) depending on the location of the dealer and the timing of the decision, as some regions require an almost immediate answer while others do not. The top 10 dealers in each province have received the notice and are eligible to purchase shares.
While we are not quite sure how listing might change the status of Honor with the US government, some of the distributors stated that “We believe that the main purpose of the listing is to avoid US suppression. If Honor has private shares after its listing, it will not be easy to suppress,” which does little to answer that question, but a recent comment from the President of Honor stated that while he does not exclude future listings, there is no plan to go public in the near future. “Glory (Honor) independence has only been eight or nine months, and we have never pursued overnight wealth. Honor is thinking about how to compete with Apple (AAPL) in mobile phones and full-scenario products, and even surpass Apple.”
We believe the Honor brand sold between 6.7 and 8.4m units in 2Q ’21, against Apple’s ~44.3m units globally and Apple’s 7.9m to 8.6m units in China, so Honor can make a case for direct competition on the Mainland, but while Apple is certainly a presence in China (~8.4% share in 2Q), Vivo (pvt), the top smartphone brand in China, along with Oppo (pvt) and Xiaomi (1810.HK) have a combined share of over 40%, with Vivo alone at 16.7%, so Honor has a way to go in its home turf before it takes on other smartphone contenders. Perhaps the company is expecting to raise capital to better compete, but we doubt it will change the minds of those intent on pushing the Huawei spin-off onto the DOC list and choking off their component supplier list.
While we are not quite sure how listing might change the status of Honor with the US government, some of the distributors stated that “We believe that the main purpose of the listing is to avoid US suppression. If Honor has private shares after its listing, it will not be easy to suppress,” which does little to answer that question, but a recent comment from the President of Honor stated that while he does not exclude future listings, there is no plan to go public in the near future. “Glory (Honor) independence has only been eight or nine months, and we have never pursued overnight wealth. Honor is thinking about how to compete with Apple (AAPL) in mobile phones and full-scenario products, and even surpass Apple.”
We believe the Honor brand sold between 6.7 and 8.4m units in 2Q ’21, against Apple’s ~44.3m units globally and Apple’s 7.9m to 8.6m units in China, so Honor can make a case for direct competition on the Mainland, but while Apple is certainly a presence in China (~8.4% share in 2Q), Vivo (pvt), the top smartphone brand in China, along with Oppo (pvt) and Xiaomi (1810.HK) have a combined share of over 40%, with Vivo alone at 16.7%, so Honor has a way to go in its home turf before it takes on other smartphone contenders. Perhaps the company is expecting to raise capital to better compete, but we doubt it will change the minds of those intent on pushing the Huawei spin-off onto the DOC list and choking off their component supplier list.
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