Kuaishou’s IPO: Things to watch

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

Feb. 12, 2021

This article was originally published on OptoUnderstand 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.

The Essential Stock Market Digest: Join 50,000+ Opto subscribers getting market-moving news direct to their inbox, 4 x a week.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.

Leveraged ETFs are complex financial instruments that carry significant risks. Certain leveraged ETFs are only considered appropriate for experienced traders.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.