Hot video app opens biggest internet offering since Uber

Top News | Avery Chen and Bloomberg 26 Jan 2021

Kuaishou Technology, China's No 2 short-video platform, opens its retail books today as it aims to raise as much as HK$42 billion in Hong Kong in what could be the world's biggest internet initial public offering since Uber.

The major rival of ByteDance's Douyin is selling 365 million shares at HK$105 to HK$115 apiece. The minimum investment is HK$11,615.89, given a board lot of 100 shares.

Only 2.5 percent of new shares will be available for retail investors. But if the retail portion is oversubscribed by more than 95 times, it will be lifted to 6 percent. Tencent has a 21.6 percent stake in Kuaishou.

The company is slated to list on February 5 with a weighted voting rights structure.

Kuaishou is attempting the world's biggest internet listing since Uber's US$8.1 billion (HK$63.18 billion) US share sale in May 2019, according to Bloomberg data.

The mainland start-up's offer will also give another boost to Hong Kong's already-hot capital market and could become Asia's largest since Budweiser Brewing Co's HK$45.1 billion float almost two years ago.

The offering of Kuaishou has attracted 10 cornerstone investors, which agreed to subscribe for US$2.45 billion of stock, based on the mid-point of the marketed range. The lineup includes The Capital Group, Temasek, GIC, BlackRock and Abu Dhabi Investment Authority. The cornerstone investors have agreed to hold stock for six months in exchange for early, guaranteed allocation.

Local brokers have set aside at least HK$190 billion quotas for the IPO. The institutional tranche had been fully subscribed by yesterday.

Kuaishou had 263.8 million daily active users as of November 30 last year. Douyin said its daily active users rose above 600 million in August.

Kuaishou's revenues rose to 52.5 billion yuan (HK$62.85 billion) for the first 11 months of last year. But the company has yet to turn a profit. Its net loss widened to 97.37 billion yuan for the first nine months last year from 1.62 billion yuan a year ago, as it poured nearly 20 billion yuan in sales and marketing.

Meanwhile, Chinese search engine giant Baidu is planning a Hong Kong secondary listing in March, with an aim to raise US$4.3 billion, according to IFR. The Nasdaq-listed firm announced an 80-for-1 stock split plan last week.

Baidu has selected CLSA and Goldman Sachs for the deal. Chinese video platform Bilibili is also targeting to launch a Hong Kong IPO next month to raise up to US$3 billion.

Separately, Shenzhen-based commercial property manager E-Star Commercial saw its shares rise more than 20 percent in the gray market ahead of its debut. The firm raised HK$881 million after its retail tranche was oversubscribed by 756 times.

Hong Kong drug maker JBM (Healthcare), - a spin-off of mainboard-listed Jacobson Pharma - launches its Hong Kong IPO today as it attempts to raise about HK$10.6 million. The minimum investment is HK$2,424.

Dr. Check offers IPO tips

Kuaishou's mega IPO provides a chance for investors to ride the rise of China's new-economy companies - and there are three ways to apply for the new shares, Dr. Check says in a video on The Standard website.

Firstly, Dr. Check suggests that investors can use brokerage accounts of family members aged over 18 to apply for one board lot of shares each.

Investors can also use margin tools. For example, an investor can apply for 200 lots by depositing around HK$200,000 and borrowing HK$1.8 million from brokers or banks. If the investor is allotted one lot of shares and the share price rises 50 percent, they may pocket around HK$4,000 after deducting the interest and the transaction fee.

And third, investors can buy the new shares in the gray market a day before listing. The debut performance, Dr Check explains, is highly likely to be better than that in the gray market.

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