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Lashou Files for Nasdaq IPO

SEC, 10/28/11

Chinese group buy site operator Lashou Group has filed its IPO prospectus with the Securities and Exchange Commission (SEC) to list Class B ordinary shares on the Nasdaq Global Market under the ticker symbol "LASO." The IPO is being underwritten by Barclays Capital, CICC HK Securities, and Jefferies.

Revenues grew from nil for the period from September 15, 2009 (date of inception) to December 31, 2009 to RMB 10.5 mln (USD 1.6 mln) for the year ended December 31, 2010 and to RMB 57.8 mln (USD 8.9 mln) for the six months ended June 30, 2011.

Gross billings grew from nil for the period from September 15, 2009 (date of inception) to December 31, 2009 to RMB 123.2 mln (USD 19.1 mln) for the year ended December 31, 2010 and to RMB 626.7 mln (USD 97.0 mln) for the six months ended June 30, 2011.

Net losses were RMB 0.7 mln for the period from September 15, 2009 (date of inception) to December 31, 2009, RMB 53.5 mln (USD 8.3 mln) for the year ended December 31, 2010, and RMB 391.3 mln (USD 60.5 mln) for the six months ended June 30, 2011.

As of October 23, 2011, Lashou's cumulative merchant base had grown to approximately 46,000 merchants supported by over 3,100 sales personnel in 184 cities and towns across 31 provinces in China, Hong Kong and Macau.

Approximately 6.8 mln paying users had purchased over 43.3 mln vouchers for services and products from Lashou as of September 30, 2011.

Lashou's average monthly unique visitors, based on data from Google Analytics, grew from approximately 295,000 during Q2 2010 to approximately 29.7 mln during Q3 2011. Registered users grew from approximately 53,000 as of March 31, 2010 to approximately 16.8 mln as of September 30, 2011. Active paying users grew from approximately 25,000 during Q2 2010 to approximately 3.3 mln during Q3 2011. Lashou's merchant base grew from less than 400 during Q2 2010 to 23,530 during Q3 2011. The number of vouchers for services and products sold on the website grew from approximately 56,000 during Q2 2010 to approximately 19.6 mln during Q3 2011.

For services offerings, currently Lashou typically pays 40% of the total contracted price to a merchant three business days after an offer expires on the website. The merchant receives an additional 30% of the total contracted price upon redemption of 40% of the vouchers purchased by Lashou users. Within seven days after the expiration date of the voucher, Lashou pays the remainder of the contracted price to the merchant. However, Lashou does not pay merchants, or Lashou claws back from merchants, as applicable, the amounts refunded to users that have not redeemed their vouchers by the voucher expiration date. For product offerings, Lashou pays the contracted price to the merchant in installments, typically with 50% paid to the merchant three business days after an offer expires, and the remainder in one or two subsequent installments typically after goods have been delivered.

Lashou's CFO, James Jian Zhang, served as an independent director and chairman of the audit committee of a China-based printing equipment company listed on the NYSE, Duoyuan Printing, Inc., from September 2009 to September 2010. Zhang and the other independent directors of Duoyuan Printing resigned after a disagreement with the other board members of Duoyuan Printing over the decision to dismiss its independent auditors, Deloitte Touche Tohmatsu, in September 2010. Subsequent lawsuits filed in the U.S. District Court for the Southern District of New York in September 2010 and the U.S. District Court for the District of Wyoming in April 2011, allege that Duoyuan Printing's registration statement filed with the SEC in connection with the company's initial public offering in November 2009 was false and misleading, and Zhang was named as a defendant in his capacity as an independent director.

Lashou revealed that in May 2011, more than 150 of employees, including certain mid-level management, tendered their resignations to accept employment with a competitor, as a result of aggressive solicitations by such competitor.

Lashou plans to use the funds generated from the offering to increase marketing efforts and expand its sales network and delivery and fulfillment infrastructure; build and establish a call center and an operations center; for research and development; to improve its enterprise resource planning, or ERP, system; to further enhance its technology infrastructure; and use the balance of the proceeds for general corporate purposes, including working capital needs and potential mergers and acquisitions, although Lashou has not currently identified any such potential transaction targets.

To view Lashou's full IPO prospectus, please click here.

Editor's Note: For more information on this topic, please see "Rumor: Group Buy Site 55Tuan Poaches 200 Lashou Staff," MD 5/20/11 issue.

Keywords: B2C sales volume active users business model James Jian Zhang Internet IPO Nasdaq registered users Lashou law profit e-commerce litigation HR group buying loss revenue fiscal report transaction volume

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