- Lizhi is an interactive audio entertainment and social platform, as well as the first-ever Chinese language podcast app to be included in the Apple Store.
- The company did poorly on IPO and saw a further price decline during the COVID-19 pandemic.
- The company stock has seen growing investors’ optimism since February 2021.
Lizhi Inc., founded in 2010, is an interactive audio entertainment and community platform. The company, headquartered in Guangzhou, China, has a global presence with its audio-based social networks, podcast content portfolios, and audio communities.
The company’s founder and CEO Jinnan Lai has a record of founding several successful internet companies. Even before embarking on an entrepreneurial journey, Lai was a radio host, which reflects his deep connection to the audio industry.
The company’s co-founder and CTO Ning Ding has a strong technical background, having worked for several tech companies and graduated from Southwest University with a bachelor’s in computer science and technology.
With the rise in popularity of social audio networking platforms such as Clubhouse, the entire space of voice-based social networking has seen a surge of interest from users and investors. Lizhi, which was already a leading online audio community, was quick to grab the opportunity and launched the ‘LIZHI PODCAST’ app in January this year.
What makes Lizhi unique, though, is that it’s one of the few listed audio-based social networking companies.
IPO failure and the coronavirus effect
The company was listed on NASDAQ under the symbol LIZI in January 2020, raising nearly $45 million in the process. The IPO saw a tepid response from the investors ,with the stock trading at $11, the lower end of its offer ranging from $11 to $13.
The stock price continued to do poorly as the world was struck by the coronavirus pandemic, and global sentiment towards the stock market soured. At some point, it traded at less than $2, more than 80% below its listing price.
Despite that fact, Lizhi Inc. continued expanding its operations under challenging market conditions and investing in building new products. The company management did not hesitate to sign on content creators and brands to create exclusive content. In May 2020, it launched an online reading and recitation campaign to celebrate China’s youth day.
With the launch of its podcast app on the Apple Store early this year, Lizhi grabbed global attention. Although what really got the stock price moving was the company’s shareholder letter published in early February that laid out a rapid growth roadmap.
Growing optimism in 2021
Improving market conditions, the rise of audio-based social media, and Lizhi’s own management vision catapulted the stock price to record highs as the stock price went from $3.3 to $15.8 in a couple of weeks yielding 380% returns in such a short period of time.
The stock price, however, came under some pressure in May. The management, looking to take advantage of the stock price appreciation, is expected to issue more shares to raise around $200 million for growth initiatives.
While this is likely to be beneficial for the company in the long term, in the short term this would mean dilution for the existing shareholders. The stock traded in the $4-$5 range for most of the month of May.
Although in what could be another sign of Lizhi’s ability to stand out, the Lizhi podcast app was featured by Apple’s App Store. It’s worth noting that this was the first time any Chinese language podcast app was featured by Apple.
The company’s stock price jumped from $4.34 on 25th May to $6.84 on 26th May. The stock has seen strong support at the $4.2-$4.3 price band, having bounced off those levels a couple of times in the past month.
The 14D RSI is currently above 60 indicating that despite the recent jump in the stock price it is far from the overbought levels.
The MACD indicator too is flashing a bullish signal as the MACD line crossed above the 9-day signal line on 26th May and has stayed above since then.
With stock dilution via new issues already being priced in, investors might be taking a fresh look at it. With Lizhi’s market cap of about $350 million, the stock is still small enough to have not come up on the radar of several large investors. Institutions hold only 0.9% of the company’s shares based on the latest filing, indicating potential upside should the company continue to show promise.