Chinese Device Charging Firm Energy Monster: Bullish With Risk On Single-Business Model

Energy Monster

  • Energy Monster went public in the US in April 2021. So far, investors have mostly been bearish about it.
  • Along with the company's increasing revenue, its operating expense rate has been expanding as well.
  • Despite challenges in the industry, the company's outlook remains positive, and we are optimistic about its future development.

In April 2021, Energy Monster (or Smart Share Global Ltd.) EM, a company running a power bank rental business in China, filed an IPO prospectus with the SEC and consequently raised USD 150 million in its initial public offering. The company is planning to use 25% of the funds it obtained for business expansion, with 20% for workforce expansion to acquire talents, and 35% for capital expansion (including investment in power banks and cabinets).

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 It seems that investors are, thus far, rather pessimistic about the charger-sharing company. On the day of listing on April 7, 2021, the issue price first was USD 8.50, closing at USD 8.54. The share turnover rate was as high as 50.23%, indicating that more than half of the investors are unwilling to hold it for the long term. 

Founded in 2017, Energy Monster has grown into an industry leader in only two years. In 2020, it occupied the top place in the sharable charger market, with a 34.4% share. By the end of 2020, Energy Monster had built a widespread network with more than 664,000 point-sites equipped with more than 5 million sharable chargers and attracted more than 219 million users. The company, together with Jiedian Technology, LaiDian Technologies, and Yidianyuan, has formed an oligopoly market in China's shareable charger industry.

The company is positioned within the industrial chain's downstream, and its cost-side financials are easily affected by the situation around the upstream raw materials and midstream battery manufacturers. With the development and penetration of more energy-demanding 5G smartphones in China, the need for shared charging equipment is increasing, serving as a catalyst for the new industry. According to a report by iResearch, China's shareable charger market reached CNY 9 billion in 2020, which has significant potential: the researcher expects it to grow to CNY 106.3 billion by 2028 with a CAGR of 36.2%. Meanwhile, the competition is getting more intense, as all the top players are expanding their networks and food delivery giant Meituan is heading into the sector.

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Disclaimer: Please consult your own advisor before making any investment decision. 

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