DJI’s Pre-IPO Round Oversubscribed by 30 Times with $15B Evaluation

“Now DJI is too popular,” says one of the investors involved in this round of DJI financing. DJI has recently released the bidding results for the initial round of its new round of financing.

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DJI has received cash deposits and bidding applications from nearly 100 investment institutions, and the sum of the subscription is more than 30 times the original plan. DJI planned to finance 1 billion yuan ($158M) at $15 billion dollar evaluation.

“This round is called Pre-IPO financing. As DJI has great growth potential and is likely to be listed, DJI actually is a powerful Party A”, says the investor.

However, as the subscription is more than 30 times the original plan, the investor feels nervous and is unsure about the bidding results.

This round of financing adopts a form of integrated Class D + Class B bidding. DJI adopted this design wanting investors to show more sincerity. Investors are only allowed to contribute to Class-B equity investments if they are willing to also give a certain amount of Class-D interest-free loan investments. For example, if an investor promises to give 90 million yuan ($14.2M) interest-free loans, and 10 million yuan ($1.6M) Class-B equity financing, then they are more likely to be selected by DJI than those who only offer 50 million yuan ($7.9M) interest-free loan financing and want to make a 50 million yuan ($7.9M) Class-B equity investment.

According to the China Securities Daily, the bidding results released on April 3 show of the $500 million (maximum subscription of single agency), the average Class D (loan)/Class B (equity) ratio is 1.29:1. That is to say the investor will be able to make a $10,000 Class-B equity investment when they offer a $12,900 Class-D interest-free loan.

Initially, the financing amount was rumored to be $500 million, then it increased to $700 million, $800 million, to now $1 billion. This rumor has been circling for nearly a month.

Data on tianyancha.com shows that before this round of financing, DJI had completed 5 rounds of financing between January 2013 and May 2015. Its largest financing amount was $75 million, and the smallest amount was at least $10 million. Investors include Sequoia Capital China, Light House Capital Management, Maison Capital, Aeternam Stella Financial Holdings, New Horizon, Accel Partners and more.

China Securities Daily reports that a document show DJI believes the bidding method of the initial bidding may have potential loopholes. Asymmetric information has led to some investors to know the Class D/Class B subscription ratio of other investors or even the highest proportion, while most investors do not.

To fix the loophole, DJI will adjust its approach in the second round of bidding.

The above-mentioned document indicates that the second round of bidding is set to last three weeks, ending at 5 p.m. on April 20. DJI will announce the Class D/Class B subscription ratio and the highest D/B subscription ratio as a reference before 4 p.m. on April 3rd, 8th and 15th.

It is also possible for DJI to knock out investors who are at the bottom of the Class D/Class B subscription ratio every week.