Just a half year after its Nasdaq listing, the operator of a B2B agricultural trading platform is using its IPO funds to move into agricultural management tools and services



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Key Takeaways:



<ul>
<li>Yimutian has announced a new acquisition and partnership as part of its shift from B2B e-commerce platform operator into agricultural services</li>



<li>The transformation could get a policy boost from China's drive to modernize its agricultural sector, but also faces challenges from the company's limited resources</li>
</ul>



Just a half year after its Nasdaq listing, Yimutian Inc. (NASDAQ:YMT) is undergoing a major transition. The company currently operates a B2B platform for traders of agricultural products, and it makes most of its money through commissions and other fees from transactions between buyers and sellers. But it wants to get more into the business of working more directly with agricultural product makers, helping them to improve their operations using digital tools. It also wants to sell more directly to consumers, cutting out costly middlemen that are currently the main buyers on its platform.



It advanced that agenda with two major new initiatives announced at the end of last week, including plans for an acquisition and a new partnership with an agricultural project in South China's Guangdong province. Investors weren't too impressed, possibly feeling they were tricked into buying one thing, only to discover the company whose stock they originally purchased was moving in a very different new direction.



Yimutian's shares sank nearly 9% on Friday after the pair of announcements, as the stock closed at $1.64 – about 60% below its offer price of $4.10 at the time of its listing last August. This type of bait-and-switch isn't uncommon among Chinese companies, some of which are constantly changing their business models as they seek out the best formula for success.



In this case, investors may be worried because the type of business transformation Yimutian is seeking could be costly, especially if it embarks on an acquisition spree to pursue its new aims. Its cash was already running dangerously low at the time of its IPO, down to just 1.7 million yuan ($254,000) at the end of last June. But it got a major new infusion with the listing, which raised about $20 million, and is now being used to fund the company's transition.



Hence, any investors who thought they were buying into a B2B agricultural trader may justifiably feel duped now that the company is using their money for something else. We would argue the new direction looks somewhat interesting, and would position Yimutian in a niche that's more difficult for competitors to copy than its current business. The two big questions are: Can it successfully navigate China's complex agricultural landscape to execute its new plan; and will its cash and other financial resources be enough to see it through the transition?



The new acquisition announced last Thursday will see Yimutian purchase Hunan Jiufeng Agriculture Co., a 14-year-old maker of premium camellia oil products, for an undisclosed sum. It said the move represents a &#34;strategic shift for Yimutian as it builds an integrated agricultural ecosystem spanning production, circulation, and consumer markets.&#34;



&#34;Our long-term vision is to create a technology-driven agricultural ecosystem that connects production with consumption,&#34; said Yimutian Chairman Deng Jinhong.&#34;By applying AI and data throughout the value chain, we aim to improve production efficiency, strengthen quality assurance, and unlock greater commercial value for agricultural products. Ultimately, our goal is to make every acre of farmland more valuable.&#34;



<h4>Agricultural project partnership</h4>



The same day it announced the Jiufeng purchase, Yimutian also unveiled a new partnership to jointly develop a large-scale integrated agricultural project in the city of Huazhou in South China's Guangdong province. That initiative covers about 21,000 mu, or 1,400 hectares, though Yimutian didn't give the project's agricultural focus. But like the acquisition, it said the alliance would bring its technical tools to another agricultural project operator.



&#34;Yimutian will contribute its digital platform capabilities, data systems, and AI-enabled agricultural technologies, while local partners will support land coordination, infrastructure integration, and project execution,&#34; it said. It added the partnership aims to create a &#34;replicable model for large-scale modern agriculture development.&#34;



The two initiatives come just months after Yimutian announced another plan last November to purchase agricultural technology company Ningbo Xunxi Technology using a combination of cash and stock. At the time, it said Xunxi had capabilities in channel expansion, digital supply chain management, and multi-category operations to help farmers and agricultural enterprises by providing them with full-chain services, from production to sales. In an update last month, Yimutian said it had completed due diligence and expected the deal to close by the end of March.



All these initiatives look interesting and could ultimately create a company that's much harder for competitors to replicate if Yimutian can successfully manage its new partnerships and integrate its acquisitions. That's often quite challenging, especially in China's agricultural landscape where land-use rights are quite complex and can often change. But Yimutian also has government policy in its favor, since China is trying to downplay traditional family farms in favor of the kinds of modern agribusinesses that lie at the heart of Yimutian's new focus.



While it moves in its new direction, Yimutian's original B2B agricultural products trading business is going nowhere fast. Its revenue slipped 18% in the first half of last year to 66.4 million yuan from 80.9 million yuan a year earlier, while its losses for the two half-year periods were roughly the same at about 60 million yuan. Its gross margin is quite high, reaching 80.3% in the first half of last year. But that was more than offset by heavy operating expenses, which totaled 72.3 million yuan during that period – well above its 66.4 million yuan in revenue.



Investors may also be concerned after Yimutian revealed last November that its volume of tradeable shares fell below the Nasdaq's $15 million minimum threshold, which could subject it to delisting if it didn't rise above that level within 180 days. It pointed out it expected the number to rise above the threshold after a 180-day lockup period ends for its pre-IPO investors, which will happen later this month. But that flood of new shares into the market could also pressure the stock price, which is likely another investor concern.



At the end of the day, Yimutian's future hinges on its ability to shed its roots as a B2B trading platform operator and move into the higher value-added business of helping agricultural firms improve their operations using its digital tools, and also helping them to sell directly to consumers. If you believe it can do that, the stock could potentially hold quite a bit of upside. But that transformation could take some time, and investors will inevitably be looking for signs of a return to revenue growth before giving the company anymore funds.



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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

Yimutian Inc. (NASDAQ:YMT) is transitioning from a B2B agricultural trading platform to agricultural management services, utilizing IPO funds for acquisitions and partnerships. Despite a $20 million raise, investor confidence waned as shares fell nearly 9% following the announcements. The company aims to enhance production efficiency through AI and data integration while facing challenges in navigating China's agricultural landscape. Recent initiatives include acquiring Hunan Jiufeng Agriculture Co. and partnering on a large-scale agricultural project in Guangdong, aiming to create a technology-driven agricultural ecosystem.

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