20 Chinese mainland companies debut on Micro Connect exchange

A batch of 20 Chinese mainland companies debuted on the Micro Connect (Macao) Financial Assets Exchange (MCEX) on Friday, helping these small and medium-sized enterprises to leverage overseas long-term capital, Gary Zhang, founder and CEO of Micro Connect, said on a listing ceremony held in Shanghai on Friday.

The companies that successfully sought financing from the MCEX are mostly consumption SMEs based in East China.

The total financing of the 20 companies was not disclosed.

Defining itself as a platform linking global institutional investors with micro and small businesses across Chinese mainland, Micro Connect was established in 2021 and went operational in August 2023.

Different from the traditional initial public offering in major stock exchanges, Micro Connect trades Daily Revenue Obligations (DRO), which represents rights to income of the SMEs. Funding is repaid through the daily tracked revenues via point of sale solutions and banking data.

Companies trading at Micro Connect are required to provide proof of a 90-day operating track record and a digital system that can be connected to Micro Connect's blockchain to share revenue statistics.

According to Zhang, the average financing of the existing listings at Micro Connect comes at around 300,000 yuan ($41,454), as it targets small business such restaurants, retail stores and sports clubs.

One purpose of establishing Micro Connect is to offer a third financing option to unlisted SMEs apart from VC/PE and bank loans, he said.

Overseas professional investors, such as HSBC, Standard Chartered and Goldman Sachs, are members trading at Micro Connect now. Sovereign wealth funds in the Middle East have also shown interest in this novel exchange, said Zhang.

Wuxi Differentiated Catering Management Co Ltd was one of the companies present at the Friday ceremony. Managing four different self-service Korean-style barbecue grill chained restaurant brands, the company seeks to raise 100 million yuan of financing via this listing, said Differentiated Catering's founder Huang Xin.

In 2023, the company opened 150 chained stores. The latest fundraising will help Differentiated Catering speed up its store opening pace, as it plans to open 250 stores this year and reaching first-tier cities like Guangzhou.

While listing at the A-share market's main board usually takes three to five years, the easier listing process at Micro Connect is one major merit, as it only took Differentiated Catering nine months from application to successful listing, said Huang.

Shanghai YY E-sports Information Technology Co Ltd seeks more than 1 million yuan of financing upon the latest listing. Founded in 2020, YY E-sports integrates e-sports experiences into the traditional mid-level hotel chains "to make full use of the vacant hotel rooms", said the company's founder Ye Liu. Targeting game aficionados aged between 18 and 35, YY E-sports have set up operations in six cities including Shanghai, Guangzhou and Nanchang of East China's Jiangxi province. Its sales revenue spiked 84.6 percent year-on-year to top over 30 million yuan in 2023.

As Ye explained, YY E-sports' business model coincides with the operation mechanism at the Micro Connect, as every new store requires capital but each existing store generates revenue regularly. Micro Connect's trading of DROs can meet the company's financing demand in a more flexible manner.

Another co-founder of Micro Connect is Charles Li, former chief executive of Hong Kong Exchanges and Clearing.

Micro Connect is also backed by investment tycoon Li Ka-shing's Horizons Ventures and the venture arm of the Agricultural Bank of China, among others.