Privately held DJI Technology has announced no plans to have an IPO and that means investors will not be able to buy DJI drone stock for the foreseeable future. DJI has just unveiled its brand new Mavic drone which will start shipping in mid October 2016 and it is small enough to fit into a purse or small backpack. The Mavic looks to be the most impressive drone ever made (at least through 2016) and competes directly with GoPro’s Karma drone.
DJI is a Chinese company and that means when it goes public in 2017 or later, there is no way to know whether it will choose to trade on a Chinese stock market (Shanghai or Hong Kong) or on one of the US markets (Nasdaq or NYSE). Which market it is listed on will greatly impact investor’s ability to invest in the stock as it is often very difficult for international investors to gain access to and open accounts with brokers that allow trading on the Chinese markets.
You May Need A Chinese Broker To Buy DJI Drone Stock
US Online discount stock brokers such as E*Trade, Scottrade, TradeKing, Merrill Edge, TD Ameritrade, and OptionsHouse let you buy and sell stocks on the American markets along with ADR’s of select foreign companies. But investors who have accounts with those companies can’t buy stocks on the Shanghai, Hong Kong, or Tokyo exchanges and that means they can’t buy stocks of many Asian companies.
If DJI Technology decides to list on one of the Chinese exchanges, then it will be very difficult for US investors to buy stock. There are many rules for “foreign” investors that China and Hong Kong have in place to discourage such investment and it would be very difficult for anyone but the most sophisticated investors to be able to jump through the hoops.
For instance, in order to buy stock of a company listed on a Chinese exchange, you first have to set up an account with a broker in China or Hong Kong and transfer money into that account. Then you have to have your broker company buy the stock for you (and there are often many different kinds of stock for each company) because doing it online by yourself like you do in the US is not possible.
But DJI Could IPO On The NYSE Or Nasdaq
It is possible though, that DJI Technology will decide to list on a US exchange just like Alibaba did. In doing so, it would be opening the door to a wider audience of international investors than it would if it listed on a Chinese exchange. If DJI did opt for the NYSE or Nasdaq, it would be easy to buy its stock for all individual investors who have online broker accounts with any of the ones listed above.
DJI’s valuation is believed to be close to $10 billion and it seems to have no need to IPO due to its surplus of cash. When a company is private it can do absolutely anything it wants but the minute it goes public, it has investors to satisfy which adds tremendous pressure to make money. Therefore, many privately held companies that are in a good financial position hold off on an IPO for as long as possible which is what is likely happening with DJI.
Would DJI Technology Be A Good Investment?
In late 2016, DJI is the dominant player in drones with about 75% of the market. Its drones are widely thought to be the best money can buy and when you read drone reviews, the DJI Phantom series and now Mavic usually come out on top. GoPro’s Karma drone looks like a worthy competitor that also transforms into a handheld camera with stabilizer but it costs more than the Mavic. The 2016 Christmas season will be the determiner of which drone is more popular.
There are a lot of other drone competitors out there, most of which are from companies that are not household names. They mostly make cheaper drones that are targeted for beginners or people who don’t have the money to buy a DJI or GoPro. All in all, the drone market is crowded and seems likely to grow as more uses for drones become apparent.
Whether you buy DJI drone stock if it becomse available should depend on how you see the growth of the drone industry in the next 5 to 10 years. It should also depend on whether you see DJI technologies sticking solely with drones or whether it is able to branch out into other related areas. Too often, especially in technology, the survival of a company depends on its ability to expand its product line into new related categories as GoPro (the camera company) has branched out into drones.
Amazon has famously touted drones as its next delivery system but so far that is just a dream. State and local governments are already getting involved in making rules for drones and the legality of widespread drone delivery is something yet to be determined. Obviously, if Amazon and other retail companies figure out how to and are allowed to deliver merchandise by drones, that would be a tremendous boon to the industry and to DJI Technology. Unfortunately right now though, something like that seems to be at least a few years away.