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Kuaishou’s IPO: Things to watch

Kuaishou’s IPO was the biggest in tech since Uber listed in 2019.

This article was originally published on Opto – Understand What Really Moves Markets. 

On its debut, Kuaishou’s share price nearly tripled, with its market cap hitting $160bn. We look at what investors need to know and what the next big China tech IPO could be.

How big was Kuaishou’s IPO?

The company’s stock gained as much as 194% on Friday after it raised circa $5.4bn at its IPO. According to the Financial Times, early-stage investor 5Y Capital’s initial stake of $1.3m is now worth $13.8bn.

By the end of Friday, Kuaishou’s share price was trading at HKD300, having hit an intraday high of HKD345. It started the day at just HKD115.

This momentum seems to have continued, with Kuaishou’s share price closing 10 February’s trading circa 15% higher at HKD397.

What is Kuaishou?

The Kuaishou app is a direct competitor to ByteDance’s Douyin, the Chinese iteration of short-form video streaming service TikTok.

Kuaishou, which translates as “Quick Hands”, launched in 2012 and was originally an app that allowed users to create GIF animations on their smartphones. As phones began to offer better cameras and networks became faster, it changed to video.

Now it is one of the most widely used social media platforms in China, with over 260 million daily users clocking an average of 86 minutes on the app. It also runs the Zynn-app, another short-form video platform that has recently surged in popularity in the US.

Kuaishou earns money by taking a cut of the tips users give content creators, along with selling advertising space. Last year, Kuaishou’s reported revenue came in at CNY41bn, a 41% increase on the same period last year.

Regulation risk

Increased regulation is a potential headwind that could impact Kuaishou’s share price. Since November, Chinese regulators have stepped up oversight of the country’s tech sector. Kuaishou warned about this in its investment prospectus, saying “intensified government regulation” could limit user growth and “materially and negatively impact our business operations and financial results”.

Analysts do not seem unduly concerned by this, however.

“For a sizeable IPO like this one I can’t recall any . . . reaching this sort of extraordinary performance,” Ronald Wan, chief executive and founder of Hong Kong investment firm Partners Capital told the Financial Times.

What’s the next big IPO?

The scale of Kuaishou’s listing could prompt rival ByteDance to go public. In November, TikTok’s parent company — and the most valuable privately held tech firm in the world — sought to raise an additional $2bn in funding.

According to Bloomberg, this was in preparation for a planned listing of a substantial part of its business, including Douyin, on the Hong Kong Stock Exchange. The additional funding would give ByteDance a $180bn valuation.

Jack Ma’s Ant Group could top even that should it get the go-ahead to list. The fintech giant had planned to go public last year in a $35bn listing, but the plan was torpedoed by the Chinese regulator on antitrust grounds. Now, Ant Group is reported to be restructuring its business, possibly paving the way for an IPO.

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