(CapitalWatch, Dec. 6, New York) Erayak Power Solution Group Inc. was all set to lift off in a $12 million in an initial public offering on the Nasdaq Tuesday in a rare U.S.-China deal – but the stock wasn't yet floating as of midday.
Erayak is selling 3 million of its ordinary shares at $4 apiece. The underwriters, Craft Capital Management LLC and R.F. Lafferty & Co. Inc., may acquire an additional 450,000 shares upon the IPO to cover over-allotments, if any.
Erayak Power sells power solution products such as sine wave and off-grid inverters, inverter and gasoline generators, battery and smart chargers, plus custom-designed products.
The entity to be listed is an offshore holding that directly owns the China-based operating subsidiaries, Zhejiang Leiya and Wenzhou New Focus, with headquarters in Wenzhou. The company does not operate through a VIE structure, which had caused regulatory issues for some U.S.-listed Chinese stocks in the past.
Founded in 2009, Zhejiang Leiya makes its own battery products and has grown on the international scale, selling in Japan, Europe, North America, Australia, and other markets. The company holds a number of compliance marks, including TÜV certification, GS Mark for Germany, and FCC Mark from the U.S. Federal Communications Commission. In China, Leiya holds a high-tech enterprise status, which gives it a preferential tax treatment.
Inverters make up the majority of Erayak Power's revenues, 63% for the first half of 2022; gasoline generators made up about 33% of the sales in the same period.
In the first half of 2022, Erayak generated $11.5 million in revenue, up 43% year-over-year, on net income of $2.2 million, up 56%. For 2021, the company reported $18.6 million in revenue on net income of $3.4 million.
The company relies on a limited number of customers for a large portion of its revenues. In 2021, the top two customers accounted for 27% of Erayak's sales, according to the prospectus.
Starting in 2020, the company has seen some "significant" order delays due to the global restrictions related to the Covid outbreaks. To cope with the issue, it has improved its online sales channels and gained some traction thanks to Amazon Europe.
Erayak said it plans to use the proceeds from the IPO for product research and development, international management and operations, marketing and business development, and automation transformation and production workshop.
The company was scheduled to go public on the Nasdaq under the ticker "RAYA" on Dec. 6, but the flotation had stalled. Erayak initially filed for a U.S. listing back in January – at the time, its IPO target was $18 million.