WeDoctor, a healthcare app backed by Tencent Holdings (TCEHY) , reportedly has shelved plans for an international initial public offering (IPO) due to a trade-war-style battle over where its data is held.
WeDoctor has been planning an overseas IPO in Hong Kong since 2017 with intentions to go public this year. The offering likely would go down very well with investors keen to access a Chinese healthcare market that is booming as China grows richer and older.
But WeDoctor has ditched those plans, according to the Financial Times, because investors would have mighty different ideas from the Chinese government as to where data on patients should be kept.
Instead, the Financial Times says WeDoctor is looking to list in Shanghai on the STAR Market, intended to be China's answer to Nasdaq. The STAR Market launched on June 13. It has looser listing rules, such as allowing unprofitable companies to go public. It also gives companies more flexibility on the timing and pricing of offerings. WeDoctor, founded in 2010, is not yet turning a profit.
China has strict Internet regulations that require all online information on Chinese clients to be held within China. The Beijing government says this is to ensure privacy and security. But China is also intent on patrolling the "Great Firewall of China," which heavily restricts the kind of information available within China. The government would likely require access to any data held within China if it required it for "national security" purposes, which has a very broad definition in the mainland.
At the same time, WeDoctor would have been subject to greater scrutiny and transparency if it listed overseas. It may also have been more difficult for WeDoctor to receive financing and backing from the government healthcare system in China if it accepted financing from investors outside China.
WeDoctor faces competition in a cutting-edge sector from Ping An Good Doctor HK:1833, which is backed by Ping An Insurance PNGAY, a company with a primary listing in Hong Kong. Ping An Good raised US$1.1 billion in a Hong Kong IPO last year, but its shares have lost one-third of their value since pricing aggressively.
The healthcare industry in China is likely to hit US$1 trillion in 2020, according to McKinsey & Co., up from US$357 billion in 2011.
WeDoctor runs an app with 160 million registered users that lets people make appointments with a network of 240,000 doctors across China. The platform can also help conduct basic diagnosis and provide prescriptions. It's likely to be popular with patients frustrated by long waits to use an overloaded Chinese healthcare system. WeDoctor has also been looking for partnerships overseas in order to route Chinese patients for international levels of care.
Sequoia Capital, Goldman Sachs Group (GS) , Fosun International (FOSUY) and the insurer AIA Group (AAGIY) are among the backers of WeDoctor. It raised US$500 million in a private financing round last year, helping it drive to a valuation of US$5.5 billion.
