Kuaishou Technology, the operator of China’s most popular short-video service after ByteDance’s Douyin, jumped 194 per cent in its Hong Kong debut after a $5.4 billion initial public offering that attracted hundreds of billions of dollars of orders.
The shares opened at HK$338, compared with the IPO price of HK$115, valuing the Tencent Holdings-backed firm at $179bn. The company sold shares at the top of its price range in a deal that ranks as the world’s biggest internet IPO since Uber Technologies’s $8.1bn US share sale in May 2019.
That spectacular rise confers on Kuaishou a price tag rivalling ByteDance -- which last sought funds at a $180bn valuation -- and ushers the nine-year-old video app into the ranks of China’s largest tech corporations. Once known for peddling quirky depictions of rural Chinese life, Kuaishou cements its place among a generation of mega-startups liken food delivery giant Meituan and ride-hailing leader Didi that grew up in the years after Alibaba Group Holding and Tencent Holdings.
If the gains hold, that would give Kuaishou the second-best debut ever for an IPO over $1bn in the world, data compiled by Bloomberg show. It joins an already long list of floats that have popped on their first day of trading in recent months amid a glut of liquidity and ultra-low interest rates.
Morgan Stanley, Bank of America Corp. and China Renaissance were joint sponsors of the deal. Kuaishou shares were up 166 per cent at HK$306 as of 1:22pm in Hong Kong. The stock could be added to the Hang Seng China Enterprises Index later this month if its market value would be among the gauge’s 10 highest as of Friday’s close.
The stellar debut will be an encouraging sign for larger rival ByteDance, which is said to be in discussions to list some of its assets in Hong Kong. Long a rumoured IPO candidate, the TikTok owner was bogged down last year in fighting a US ban on its globally popular app after being labeled a national security threat.
“A successful listing by Kuaishou will pave the way for its larger rival,” said Bloomberg Intelligence senior analyst Vey-Sern Ling. “Douyin will be more motivated to come to the market and investors can get better insight into China’s short-video industry with Kuaishou’s regular disclosures going forward.”
Breaking Records
Kuaishou’s coming-out party broke records in Hong Kong for the number of retail investors subscribing to its shares and the amount pledged in the process. About 1.4 million mom-and-pop investors -- one of every five people in the city -- submitted HK$1.26 trillion ($163bn) of orders, while institutional buyers stumped up almost $200bn.
The demand matched the frenzy for the Hong Kong leg of Ant Group's mega IPO, which drew in HK$1.3tn of bids for its retail tranche, before the planned $17.2bn offering collapsed.
“Growth tech companies are still very much in demand,” said Gary Dugan, chief executive officer at the Global CIO Office in Singapore. “With the world still struggling with the Covid crisis, investors remain focused and investing more in tech stocks that have a strong growth story. Hence, we expect demand for these types of IPOs to remain strong and likely early trading share price premiums to tend to be extraordinary.”
Billionaires
Founded by former Google employee Su Hua and Cheng Yixiao as an app built around sharing animated GIF images, Kuaishou pivoted to short video in 2013 and added live streaming in 2016, landing footholds in what eventually became two of the hottest social media formats in the world.
At the opening price HK$338, the net worth of Mr Su has jumped to more than $21.1bn and Mr Cheng is worth $14.7bn. Two other company executives’ fortune also got boosted to over $3bn.
The firm had 264 million average daily active users on its main Kuaishou app as of November 2020, according to its prospectus, less than half the 600 million on Douyin. Still, it’s been growing fast.
Revenues climbed 49 per cent to 40.7bn yuan ($6.3bn) in the first nine months of last year, after the company ratcheted up monetisation efforts through advertising and e-commerce. While Kuaishou offers free access to its main platform, the startup takes a cut of the tips users give to their favourite live-streamers who perform viral challenges, lip-synch to the latest pop songs and play video games.
