NetEase Delays $1bn Hong Kong IPO of Music Service on Crackdown Concerns

• Netease’s Cloud Village listing was due to proceed this week

• Shares of parent company Netease fell 14% last week

NetEase is delaying the $1 billion Hong Kong listing of its music streaming business Cloud Village because of the negative impact on trading from China’s regulatory crackdown on major tech companies.

The initial public offering had been approved by the Hong Kong Stock Exchange’s listing committee, according to filings lodged with the exchange, and preliminary meetings were held with potential investors last week.

The IPO was due to proceed this week but was put on hold on Monday, two sources revealed, amid investor concerns caused by uncertain conditions that tech companies face following the regulatory crackdown.

Netease is one of the firms affected by last week’s sell-off that hit China’s gaming sector after state media criticised the impact of video games on children and called them ‘spiritual opium.’

NetEase’s Hong Kong-listed shares lost over 13% last week after it was reported that China’s gaming sector could be next in line for intensified regulatory scrutiny. A NetEase spokesperson said the company had no immediate response. Its shares were up 4.1% on Monday.

The crackdown, driven by concerns over data and national security, has affected companies including Tencent, Meituan, Didi Chuxing, Baidu and Alibaba.

NetEase announced in May it would spin off Cloud Village and retain 62.4% ownership of the streaming business. Due to its voting structure, NetEase also planned to retain no less than 50% of the voting power in the company following, according to its May regulatory filings. Cloud Village had aimed to raise up to $1 billion in the Hong Kong IPO, one of the sources said.

Alibaba Group Holdings, Baidu, General Atlantic and Boyu Capital are Cloud Village investors, according to the firm’s listing documents.

•Reuters and Jim Pollard