Could Lichen China (LICN) be the next IPO wunderkind?

Lichen China is scheduled to IPO on the Nasdaq on September 12.
LICN shares will be listed at $4.
Lichen China is involved in tax prepartion and financial advising.

Clay Webster FXStreet

Lichen China Limited (LICN) is a Chinese tax preparation and financial advisory that is scheduled to IPO on Monday, September 12. Based in Jinjiang, the company plans to sell its shares on the Nasdaq at a starting price of $4 each.

Normally, a small IPO like this would not be all that interesting. Lichen is only selling $25 million worth of shares, and the tax and financial advice industry is rather staid. However, a rash of small-cap Chinese stocks have had enormous IPO spikes this year that may give traders more interest in Lichen.

In August Addentax Group (ATXG) soared more than 13,000% on its debut, and only a week earlier Jianzhi Education (JZ) did 3,000%. Earlier in the summer the shadowy financial firm AMTD Digital (HKD) from Hong Kong famously shot up 32,000% over the course of one month. Most of these companies all had one thing in common – small floats. This lack of supply allowed retail traders and others to create a buying frenzy.

Lichen China IPO

Lichen China shares some similarities with its share price soaring brethren. Like many of those companies, it is closely held. CEO and chairman Ya Li controls 87% of the company's voting rights through his class B shares.

As a closely held company, however, Lichen China has far more key person risk than a normal company. This can be seen in Lichen's F-1 filing with the Securities & Exchange Commission (SEC).

"Lichen China Limited is permitted to elect to rely on certain exemptions from corporate governance rules. Lichen China Limited does not plan to rely on these exemptions, but may elect to do so after completing this offering," the filing reads.

Through its underwriters, Lichen is selling 6.25 million shares at $4 each. The total number of class A shares will be 19.75 million post-IPO. This could, however, expand to 20,687,500 if the underwriter decides to exercise their over-allotment right.

The F-1 says that 30% of the proceeds will be used to expand the company's financial and tax services, 30% will be used for working capital, 20% is for improving brand recognition through marketing, and 20% will go toward software research & development.

Source: LICN F-1 filing

Author

Clay Webster

FXStreet

Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.

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