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China's Kuaishou aims to raise up to US$5.42 billion in Hong Kong IPO

China's Kuaishou aims to raise up to US$5.42 billion in Hong Kong IPO

A screen showing footage of a military parade is seen at a booth of Chinese video-streaming start-up Kuaishou at the 2020 China International Fair for Trade in Services in Beijing, China, Sep 4, 2020. (File photo: REUTERS/Tingshu Wang)

HONG KONG: Chinese online video company Kuaishou Technology is aiming to raise US$4.95 billion to US$5.42 billion in an initial public offering (IPO) that will be the largest in Hong Kong for more than a year, according to a term sheet reviewed by Reuters.

The online video site, backed by Tencent Holdings, will price 365.2 million shares at between HK$105 and HK$115 apiece, the term sheet shows.

Kuaishou did not immediately respond to a request for comment.

There is a so-called greenshoe option to sell a further 54.78 million shares in the 30 days after listing that could take the total amount raised up to US$5.7 billion to US$6.2 billion.

The IPO will value Kuaishou at between US$55.6 billion and US$60 billion, pre-greenshoe, the term sheet showed. If the extra shares are sold it would take the market capitalisation to US$56.3 billion to US$61.7 billion.

The company was valued at US$30 billion after it raised US$3 billion from backers in late 2019.

Ten shareholders, led by Capital Group, have become cornerstone investors accounting for about US$2.45 billion, the term sheet showed.

If Kuaishou raises US$6.2 billion, it will beat the most recent largest IPO in Hong Kong which was Budweiser Brewing Company's US$5.75 billion IPO in September 2019.

Above that, China Tower Corp raised US$7.4 billion in August 2018. Kuaishou's deal, at the top end, will be the largest IPO in the world of a digital company since Uber Technologies raised US$8.1 billion in May 2019.

Kuaishou, which means "fast hand" in Chinese, operates apps that allow user-uploaded videos as well as live-streaming programs through which vendors can promote consumer products.

The final IPO price will be set on Friday (Jan 29) and Kuaishou shares will start trading on the Hong Kong exchange on Feb 5.

Kuaishou reported an adjusted revenue of 40.6 billion yuan (US$6.27 billion) in the nine months to Sep 30 last year and an adjusted loss of 7.2 billion yuan, according to its filings to the Hong Kong exchange.

"The company used to make a profit but it ramped up its sales and marketing spending in 2019 and went into a loss," said Sumeet Singh, head of research at Aequitas, who publishes on the Smartkarma platform.

"This spending should normalise over the next few years and it will be back in the black, competition permitting," he said. "In our view, looking at where domestic and international peers are trading Kuaishou still offers decent upside from the IPO price." 

Source: Reuters/dv


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