IPO News: What to look for when Nano Labs debuts on Nasdaq

It is estimated that the size of the global fabless IC design market increased to $170 billion in the past four years, representing a compound annual growth rate of about 14%. The trend is expected to continue in the coming years, creating a favorable operating environment for fabless chip designers like Nano Labs Ltd.

China-based Nano Labs, which is focused on cryptocurrency mining technology, recently downsized its planned initial public offering. As per a revised SEC filing, the company intends to offer 1.77 million shares in the range of $11.35-$11.51 per ADS. It has applied to list the stock on the Nasdaq Global Market under the ticker symbol NA.

The Offering

The book-runners on the deal are AMTD Global Markets, Maxim Group, and Tiger Brokers. In an earlier regulatory filing, the company had stated it would offer around 3.5 million American Depositary Shares for $9.5-11.5 per ADS.

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Nano Labs, which was founded in 2019, pursues the mission of providing ubiquitous computing power to the metaverse computing network with its fabless logic-memory integrated circuits. As part of its efforts to expand operations in the overseas market, the company last year established IPOLLO PTE. LTD, an indirect wholly-owned subsidiary, in Singapore.

Tailwinds

The rapid growth of the global IC design market — thanks to the emergence of advanced technologies like artificial intelligence, blockchain, and IoT — bodes well for chip designers. Moreover, the favorable policies adopted by the Chinese government, with regard to the fabless IC design business, have created a conducive atmosphere for companies to thrive.

The tech firm expects to gain an edge over competitors by leveraging its innovative Cuckoo series, which is one of the first near-memory HTC chips available in the market with high bandwidth. Similarly, the FPU architecture and superior supply-chain management capabilities come in handy for achieving efficiency in areas like time-to-market.

Road Ahead

The management’s key growth strategies include enhancing research and development capabilities, international expansion, and ramping up supply chain management. However, such initiatives require heavy investment and that would weigh on margins. As far as the company’s entry into the U.S market is concerned, the strict regulatory environment back home can lead to uncertainties. Also, high exposure to cryptocurrency makes it vulnerable to the volatilities in the crypto market. It is worth noting that Nano Labs is a loss-making company.

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For the fiscal year ended December 2021, the company generated around $6.19 million in revenues, representing a multi-fold increase from the prior year. This time, revenues came entirely from product sales. However, Nano Labs incurred a wider loss of $27.4 million due to a sharp increase in operating expenses.