(ATF) China’s second largest online short-video company Kuaishou Technology, which is a TikTok equivalent, filed for a Hong Kong initial public offering (IPO) on Thursday that could raise up to $5 billion.
The Tencent-backed start-up operates its eponymous app in China and overseas equivalents Kwai and Zynn. Its listing plans come as rival ByteDance – operator of Douyin at home and TikTok abroad – has become a target of US government concern over data security.
The nine-year-old company did not disclose the size, but people with knowledge of the matter previously told Reuters that Kuaishou was aiming to raise up to $5 billion, which would value the company at more than $50 billion.
Tencent is a cornerstone investor for Kuaishou’s IPO, and Jack Ma’s private equity fund YF Capital is also negotiating for more share allocation, according to a report by Beijing News. Cornerstone investors, more common in Hong Kong than elsewhere, are large institutions that agree to hold the shares for about six months in exchange for a sizable allocation.
In its prospectus, Kuaishou said its loss widened to 68.09 billion yuan ($10.31 billion) in the six months to the end of June 30, from a loss of 268.7 million yuan a year earlier.
Kuaishou’s revenue for the first six months grew by nearly 50% year-on-year to RMB 25.3 billion, according to the filing.
Livestreaming is a major source of Kuaishou’s revenue. The business generated RMB 17.3 billion in revenue from livestreaming in the first six months of 2020, accounting for 68.5% of the company’s total revenue in the period. The company said its live-streaming business had experienced “significant growth” in recent years, but warned that growth may slow, citing a decline in user demand.
The company had 485 million average monthly users and 258 million average daily users on the Kuaishou app in the period.
Morgan Stanley Asia, Merrill Lynch Far East, and China Renaissance Securities (Hong Kong) are the joint sponsors of the offering.
According to an analysis by investment research and consulting firm ChinaVenture, Kuaishou’s valuation would make it the 20th most valuable company listed on the Hong Kong Stock Exchange, more valuable than SinoPec, BYD Auto, Bank of Communications, and Vanke.
It would also rank seventh among the most valuable internet companies on the Hong Kong exchange, after Alibaba, Tencent, Meituan, JD.com, Xiaomi and Netease, ChinaVenture said.
Venture capital firms such as Sequoia, Shunwei and Morningside will be able to exit with sums far greater than their original investment, they said.
Kuaishou raised $3 billion late last year in a pre-IPO funding round led by the main backer Tencent, and that round valued the company at $30 billion.
ByteDance seeks $180 billion valuation before IPO
In related news, recent media reports said ByteDance is in discussions to raise $2 billion before listing some of its businesses in Hong Kong, even as it seeks to avoid a ban on its TikTok service in the US.
Douyin, the Chinese counterpart of TikTok owned by ByteDance, is Kuaishou’s immediate rival and has a larger user base.
ByteDance is in talks with a group of investors over funding that would boost its valuation to $180 billion, and the company could then start preparing some of its biggest assets including Douyin and Toutiao for an IPO in Hong Kong, people familiar with the matter said.
While ByteDance has gained the bulk of its revenue and international recognition from its short-video business, it is also expanding into new areas such as e-books. A ByteDance wholly-owned subsidiary plans to acquire about 11% of shares in China-listed online literature company Zhangyue for 1.1 billion yuan ($170 million), according to an announcement by Zhangyue Wednesday.
Zhangyue, with a current market cap of 12 billion yuan, operates an e-book app with 170 million average monthly users during the first half.
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