Jimmy family
What is Building DreamStar technology?
Based in Shenzhen, China, Building DreamStar Technology (BDS) was established to provide real estate as a service to businesses of all sizes, as well as other related professional services.
The management is led by co-founders and Chairman Houde Li, who has extensive experience in the venture capital investment industry and general management.
The company’s PRC units operated 46 space sites and had 1,101 customers who relocated to their premises.
Coworking space occupancy dropped from 81% at the end of 2020 to 73% at the end of 2021.
Building DreamStar has received at least $20.2 million from investors in equity and an additional $24.4 million in debt from related parties.
The company markets its services online and offline, including partnerships with real estate agents to whom the company pays lease commissions.
According to a 2019 market research report by the China Real Estate Chamber of Commerce, the number of co-working spaces in China grew by almost 60% in the first ten months of 2018.
However, many of these locations were less than 50% let at the time.
Since the onset of the COVID-19 pandemic, many co-working space companies have halted their expansion efforts, instead focusing on making their existing locations more attractive to potential customers while also weathering the restrictions of the pandemic.
Key contestants or other industry participants include:
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MyDreamPlus
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KR room
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Ucommune
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WeWork China – Stake sold in September 2020
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Numerous smaller competitors
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Landlords of existing properties
Building DreamStar Technology IPO date and details
The date of Building DreamStar Technology’s initial public offering or initial public offering has not yet been announced by the company or its underwriter.
(Warning: Compared to stocks with more history, IPOs typically have less information for investors to review and analyze. For this reason, investors should exercise caution when considering investing in an IPO or immediately after an IPO. Also Investors should stick with it, however, remember that many IPOs are heavily marketed, past company performance is no guarantee of future results, and potential risks may be underestimated.)
BDS intends to sell 4.6 million common shares at a proposed mid-point price of $5.50 per share for gross proceeds of approximately $25.3 million, excluding the sale of customary underwriting options.
No existing or potential new shareholders have expressed an interest in purchasing shares at the IPO price.
Assuming a successful IPO in the middle of the proposed price range, the Company’s enterprise value at IPO (excluding underwriter options) would be approximately $227.6 million.
The free float to outstanding share ratio (excluding underwriter options) will be approximately 11.33%. A number below 10% is generally considered a “low float” stock, which can experience significant price volatility.
According to the Company’s most recent regulatory filing, it plans to use the net proceeds as follows:
approximately 40% or $8.88 million (assuming no over-allotment option is exercised) for expansion of our space and service offerings, such as: B. the online search tool for office space;
approximately 35% or $7.77 million (assuming no exercise of the over-allotment option) for potential strategic investments and acquisitions, including co-working spaces, operated by competitors and companies that control the current operations of the companies in Chengdu, Shenzhen, Shanghai and other major cities in China, although we have not identified any specific investment or acquisition opportunities at this time; and
approximately 25% or the remaining amount for general corporate purposes, which may include working capital needs and other corporate uses.
(Source – SEC)
Management’s presentation of the company’s roadshow is not available.
Management says the company is not currently facing any legal proceedings that would materially adversely affect its financial condition or operations.
The only listed subscriber to the IPO is Univest Securities. Univest is a frequent underwriter for Chinese and Japanese companies looking to list their shares on the US public markets.
How to invest in the company’s stock: 7 steps
Investors can purchase shares of the stock in the same manner as shares of other publicly traded companies or as part of the pre-IPO allotment.
Note: This report is not a recommendation to buy stocks or other securities. For investors interested in making a potential investment after the IPO closes, the following steps to buying shares will be helpful.
Step 1: Understand the financial history of the company
Although not much public financial information is available about the company, investors can view the company’s financial history on its Form S-1 or F-1 with the SEC (source).
Step 2: Evaluate the company’s financial statements
The primary financial statements available for publicly traded companies include the income statement, balance sheet, and cash flow statement. These financial statements can help investors understand a company’s cash capitalization structure, cash flow trends, and financial condition.
BDS financials are out of date, but the company is generating higher revenue, lower gross losses and negative gross margin, lower operating losses and net losses, but growing cash used in operations
The share of sales costs in total sales has fallen as sales have increased; its sales efficiency rate was 0.9x in 2021.
Step 3: Evaluate the company’s potential against your investment horizon
When investors evaluate potential stocks to buy, it’s important to consider their time horizon and risk tolerance before buying stocks. For example, a swing trader might be interested in short-term growth potential, while a long-term investor might prioritize strong financials over short-term price movements.
Step 4: Choose a brokerage
Investors who do not already have a trading account start by choosing a brokerage firm. Account types commonly used for trading stocks include a standard brokerage account or a retirement account like an IRA.
Investors who prefer fee-based advice can open a trading account with a full-service broker or independent investment advisor, and those looking to manage their portfolio at a reduced cost can opt for a discount brokerage firm.
Step 5: Choose an investment size and strategy
Investors who have decided to buy shares in the company should consider how many shares they want to buy and what investment strategy they want to adopt for their new position. The investment strategy determines an investor’s holding period and exit strategy.
Many investors choose to buy stocks and hold them for an extended period of time. Examples of basic investment strategies are swing trading, short-term trading, or investing over a long-term holding period.
Investors wishing to receive an allocation of shares at the IPO price prior to the IPO would “express interest” to their broker prior to the IPO. Declaring an interest is not a guarantee that the investor will receive an allotment of shares prior to the IPO.
Step 6: Choose an order type
Investors have many ways of placing orders to buy stocks, including market orders, limit orders, and stop orders.
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Market Order: This is the most common type of order filled by retail traders. A market order executes a trade immediately at the best available transaction price.
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Limit Order: When an investor places a buy limit order, they set a maximum price to be paid for the shares.
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Stop Order: A buy stop order is an order to buy at a specific price, known as the stop price, which will be higher than the current market price. In the case of buy stop, the stop price is lower than the current market price.
Step 7: Submit the trade
After investors fund their account with cash, they can set an investment size and order type, and then submit the trade to place an order. If the trade is a market order, it will be executed immediately at the best available market price.
However, when investors place a limit order or stop order, the investor may have to wait for the stock to reach its target price or stop-loss price for the trade to complete.
The final result
Structure DreamStar seeks investments in the US public capital market to expand its service offering and acquire competitors or to expand geographically.
The market opportunity for the provision of coworking space services in China is large but fragmented and it is difficult to achieve economies of scale due to the sheer size of the market.
Like many Chinese companies looking to enter US markets, the company operates within a VIE structure, or Variable Interest Entity. US investors would only have an interest in an offshore company with contractual rights to the company’s operating results but would not own the underlying assets.
This is a legal gray area that poses a risk that management will change the terms of the contractual agreement or the Chinese government will change the legality of such agreements. Potential investors for the IPO would have to take this important structural uncertainty into account.
The main risk to the company’s prospects is changing user habits as a result of the pandemic as more individuals and businesses seek to work from home. However, this can also open up growth opportunities as companies look for more distributed locations and therefore need more coworking services.
Univest Securities is the sole underwriter and the IPOs it has led over the past 12 months have generated an average negative return (9.1%) since its IPO. This is a lower performance for all major underwriters over the period.
The company has delivered revenue growth and its other key financial metrics have improved, but remain fundamentally negative.
Due to the impact of the pandemic, companies like BDS have focused on adding services rather than expanding their operations.
While this seems like a smart approach that could help the company achieve profitability, it’s all subject to the unpredictable whims of Chinese regulators and their violent response to COVID-19 outbreaks, often with severe regional lockdowns.
Given these uncertainties and significant and ongoing losses, I await BDS’s IPO, although the stock’s low notional price may attract day traders.
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