In a recent report by Bloomberg, Chinese social media and e-commerce platform Xiaohongshu, also known as Little Red Book, is set to far exceed its net profit forecasts for this year. Originally estimating a net profit of $50 million, the company is now on track to achieve approximately $500 million.
However, despite speculation from Chinese media outlets focusing on IPO news, Xiaohongshu has denied any immediate plans to go public. These reports suggested a potential listing in Hong Kong as early as the latter half of 2024.
It’s worth highlighting that Xiaohongshu, alongside several other internet platform companies, initiated investor roadshows in the United States in the first half of 2021. These companies boasted monthly active users (MAUs) in the tens or even hundreds of millions.
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Towards the end of 2021, Xiaohongshu secured a round of financing, primarily through the increase of existing shareholders, resulting in a post-investment valuation exceeding $20 billion. In September, The Information reported that Sequoia China had acquired shares in Xiaohongshu at a valuation of about $14 billion through a series of transactions earlier this year. Prior to these transactions, Sequoia did not hold any shares in Xiaohongshu.
In the current market, the ability to self-sustain is increasingly prioritized. This shift comes as the number and scale of mid-to-late-stage funds have seen a significant decrease. Moreover, the Hong Kong market has traditionally favored profitable companies, particularly those within the consumer goods sector reporting net profits exceeding 100 million yuan.
The focus has now moved away from the “burning money for growth” approach. Instead, sustained profitability has emerged as the primary target for all “super unicorn” companies.
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