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UPDATE 3-Tencent-backed Kuaishou jumps three-fold in HK debut after $5.4 bln IPO

· 02/04/2021 20:39
UPDATE 3-Tencent-backed Kuaishou jumps three-fold in HK debut after $5.4 bln IPO

Kuaishou IPO biggest in HK since Budweiser Asia float in 2019

Strong debut makes company fifth-largest in HK by market value

Performance bodes well for other IPOs in pipeline - analyst

Recasts, adds context

By Alun John and Donny Kwok

- Kuaishou Technology 1024.HK surged three-fold in its Hong Kong stock market debut on Friday after a $5.4 billion IPO, as a global retail trading frenzy brought in massive demand from mom-and-pop investors for the Chinese online video service operator.

The first-day pop, while among the largest, is just one of many strong recent debuts in the Asian financial hub, which analysts say is an encouraging sign for others looking to tap into the market for funds but also underlines worries that an asset bubble may be emerging. nL4N2IV26P

Kuaishou shares opened at HK$338 ($43.60) and rose to as much as HK$345 ($44.50), versus the initial public offering price of HK$115 apiece. At the day's high, Kuaishou's valuation stood at just over $180 billion - making it the fifth largest listed company in Hong Kong by market capitalisation.

The float is the biggest in Hong Kong since Budweiser's Asia unit 1876.HK raised $5.75 billion in 2019. Retail investors bid for 1,204 times the amount of Kuaishou shares on offer for them in the IPO, mostly backed by borrowed money. nL1N2K40MB

The Friday spike in Kuaishou shares was mainly driven by demand from customers in mainland China, who cannot invest in IPOs but can buy in the secondary market, and retail investors in Hong Kong who failed to get shares in Kuaishou's IPO, said Louis Tse, managing director of brokerage Wealthy Securities.

It was also driven by pent-up retail demand following the last-minute suspension of Ant Group's blockbuster $37 billion dual-listing in November, Tse added. nL1N2HP155

"This bodes well for other Hong Kong IPOs, if the companies are well known on the mainland," he said.

TikTok-owner Bytedance has been considering listing its onshore Chinese short video app Douyin in Hong Kong, Reuters reported last year. nL1N2HH09L

Douyin and Kuaishou are rivals.

Kuaishou was the world's No.2 short video platform in the first nine months last year, its IPO prospectus said.

It had an average of 275.9 million daily active users over the period, the prospectus adds, citing iResearch, as the pandemic forced people to spend more time online.

While access to Kuaishou is free, the company makes money through selling virtual items which users gift to the creators of the videos, online marketing and commissions from e-commerce sales on the platform.

The company plans to use the proceeds of the IPO to grow its ecosystem, strengthen research and for selective acquisitions, it said in an exchange filing.


BUBBLE WORRIES

Kuaishou's sharp spike on debut, however, comes against the backdrop of growing fears about an asset bubble, with amateur investors boosting the price of assets ranging from cryptocurrencies to new market listings.

Shares in Smoore International 6969.HK gained 150% in July last year after it raised $1.1 billion at its IPO. nL4N2EH17P

JD Health International Inc 6618.HK gained 56% when it debuted in December after raising about $3.48 billion, and toy maker Pop Mart International Group 9992.HK closed nearly 80% higher on its first day.

The recent sharp rise and fall in U.S. videogame retailer GameStop GME.N and some other stocks have put investors on edge and prompted some brokerages to raise margin requirements or stop offering leverage for buying securities. nL1N2K30QK

($1 = 7.7523 Hong Kong dollars)


(Reporting by Donny Kwok and Alun John; Writing by Sumeet Chatterjee; Editing by Himani Sarkar)

((Alun.John@thomsonreuters.com; +852-28415827;))