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Tuya: Overvalued, risky, but worth watching

  • On 18 March 2021, Tuya sold 43.59 million American depositary shares, raising US$915 million on NYSE
  • Tuya may become the answer to the three largest challenges of the AIoT sector
  • Its IPO, however, was overvalued, per our analysis
Tuya: Overvalued, risky, but worth watching

The Chinese AIoT leader is facing some challenges, which it's rather well-equipped to deal with.

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On March 18, 2021, the popular Chinese Internet of Things company was listed on NYSE with the ticker symbol of 'TUYA.' According to its prospectus, Tuya offered 43.59 million American depositary shares (ADSs) in its IPO. The company has raised up to USD 872 million in the U.S. market and is expected to have 417.36 million ordinary shares outstanding and 142.4 million Class B shares after that. Its stock price surged to USD 26 on the first day but then dropped to around USD 22 and closed the week slightly higher, at USD 24.64. In this article, we will analyze the company's investment potential.

About Tuya

Founded in June 2014, Tuya has become a popular global AI+IoT (AIoT) and voice AI interactive platform, providing global developers, companies, and individuals with one-stop AIoT services. The company's two founders have a robust technical background and once worked for Alibaba Group (BABA: NYSE).

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Tuya is a midstream company in the smart home sub-industrial chain. The company's target customers can be divided into two groups. The first group consists of companies that produce intelligent devices. Tuya provides complete one-stop equipment intelligent services, including Cloud module, IoTOS, Cloud IoT service, and client apps them. The other group contains individuals favoring the smart home system. At present, through its 'Powered by Tuya' system, the company has provided technical support for smart devices for many global large companies, such as Softbank, Lenovo, Samsung, Midea and TCL.

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Looking back to its financing history, before its IPO, Tuya received five rounds of investment since 2015. NEA, the world's largest venture capital firm, is the largest and the first institutional investor and had 23.9% equity of Tuya prior to its IPO. Also, it is worth noting that the latest statement also shows that Tencent has invested in Tuya twice since 2019 and became the leading investor in Series D (which was not disclosed before). It held 10.8% shares before the IPO. The IPO's subscribers include Morgan Stanley, BofA Securities, China International Capital, Tiger Securities, and CMB International Capital, with a total intention of USD 500 million. By analyzing Tuya's investor lineup, we think a cascade of institutional investors is rather optimistic about Tuya and its AIoT capabilities.

At the beginning of 2020, when the COVID-19 epidemic disrupted the Chinese market, Tuya seized the opportunity to expand its business and client base. Tuya's active layout has seen good development in the past year. As of December 31, 2020, Tuya had attracted more than 262,000 registered developers to its platform. The platform has increased active users with more than 122 million interactions and about 84 billion device requests per day. Throughout 2020, the number of devices powered by the Tuya system reached 204 million. By the number of smart devices empowered in 2020, Tuya has become the largest AIoT PaaS platform.

To read the full article for free, please click here.


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