Cloud Village, NetEase’s music streaming affiliate, aims to raise up to $ 453 million relaunch of its initial public offering in Hong Kong which was postponed in August in the middle of a regulatory repression on Chinese Internet companies.
The Hangzhou-based company is selling a total of 16 million shares, or 7.2% of its enlarged share capital, at HK $ 190 (US $ 24.38) to HK $ 220 each. There is an over-allotment option to sell up to an additional 2.4 million shares if demand is strong enough.
In August Cloud Village obtained the green light from the listing committee of the Hong Kong Stock Exchange which would have allowed it to launch a sale of shares. But he decided to postpone as Chinese tech companies struggled with increased regulatory control.
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Beijing’s crackdown, targeting the tech giant’s anti-competitive behavior and abuse of data privacy, has dried up IPO deals in Hong Kong. Fundraising in the third quarter of this year was the lowest since the first quarter of 2020, when Covid-19 killed the market.
At the time, Chinese tech companies faced uncertainty over proposed regulations that required platform operators with at least one million personal user data to pass the cybersecurity exam before applying. an IPO.
But on November 14, a separate set of draft regulation clarified that the requirement does not apply to applicants for the Hong Kong IPO, paving the way for some new issuers to move their transactions forward.
Bank of America, CICC and Credit Suisse are the co-sponsors and co-bookkeepers of the transaction. Cloud Village shares are scheduled to debut on December 2 and will trade on the main board under the stock code “9899”. The IPO will end on Friday.
An updated prospectus revealed that three key investors have pledged to take a portion of the shares. These are parent company NetEase, Sony Music Entertainment and asset manager Orbis Investments, which together plan to invest $ 350 million, or up to 83% of the total value of the IPO. assuming it is in the middle of the range.
NetEase, one of the largest internet companies and game publishers in China, owns 62.5% of Cloud Village. Other shareholders include the owner of this newspaper, Alibaba Group Holding.
Yet the loss-making company has already said it will face more losses in the next few years.
The company, which claimed to have 60 million music tracks and 185 million monthly users at the end of June, including the largest number of Japanese pop, or J-pop, music fans in China, said it did. was “at a relatively early stage”. to turn fandom into profit.
“Due to our continued investments in content, technology, marketing initiatives as well as research and development … we expect to remain in deficit for the years ending December 31, 2021, 2022 and 2023.”
Monthly paying users of Cloud Village’s online music services grew to 26.1 million in the six-month period ended June of this year, double the level of a year ago. Net loss attributable to shareholders totaled 3.8 billion yuan ($ 595 million) for the first half, compared with 1 billion yuan a year earlier.
Cloud Village plans to use the net proceeds from its IPO to expand its music library and invest in technology.
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