Kuaishou managed to raise $5.32 billion equivalent to 41.28 billion Hong Kong dollars in its Initial Public Offering (IPO).
Short video company and a competitor of TikTok Kuaishou Technology Company Ltd over the last 24 hours made its market debut in Hong Kong on the right foot. According to the report, the Kuaishou company recorded a 200% price surge before closing the day with a surge of 160% on its debut.
This has been said to be the beginning as the company stands a chance of raising about $6 billion if the investment bank issues more shares on the condition that its overallotment option is triggered. Kuaishou in a statement claimed that its shares were oversubscribed and its demand was very high.
The company managed to raise $5.32 billion equivalent to 41.28 billion Hong Kong dollars in its Initial Public Offering. They released the shares for 115 Hong Kong dollars each at the top of each expected range as claimed by the report. It now faces very stiff competition from several companies including Tencent Holdings Lts’s (HKG: 0700) WeChat Messaging App, and Douyin International Holdings Li, the Chinese version of TikTok. The Kuaishou shares opened up for 338 Hong Kong dollars per share and closed the day with 300 Hong Kong dollars per share.
Though the company made a tremendous effort to launch its IPO, it came at a time where the government has subjected the tech companies to critical scrutiny with the publication of the anti-monopoly regulations. China has come up with strict internet regulations that even limit the operation of short videos and live streaming apps. According to the IPO Prospectus of Kuaishou, their IPO may be affected by the standing regulations imposed by the authorities.
”… intensified government regulation of the short video, live streaming, and e-commerce industries in China could also restrict our ability to maintain or increase our user base or the user traffic to our platform, which will materially and negatively impact our business operations and financial results, ” he said.
Kuaishou admitted that the market they find themselves in is very competitive and they have to compete with tech giant companies that operate online business marketing and e-commerce platforms as well as social platforms. For this reason, their inability to rise to compete effectively will negatively affect their financial status, business, results of operation as well as their prospect.
Kuaishou currently has multiple ways of generating revenue which include Live Streaming, Ads and online marketing, and eCommerce and games. In the first nine months of 2020, the company generated 25.31 billion yuan in revenue from live streaming, which was 62% of total sales. In the area of Ads and online marketing, they made 13.34 billion yuan in the first 9 months of 2020.
This contributed to 35% of total sales, and a 200% rise from the previous year. Its e-commerce and gaming sector recorded 204.06 billion yuan in the first 9 months of 2020. This was an 1100% increase as claimed by a report.
Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.
