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IPO

Kuaishou sets record as Hong Kong investors pile into $5.4bn IPO

Video platform share price set to be at top of range for offer next week

Kuaishou Technology, backed by Tencent Holdings, is China's second-most popular short-video app, after ByteDance's Douyin.   © AP

HONG KONG -- Chinese short-video platform Kuaishou Technology has set records for retail interest in a Hong Kong initial public offering, receiving more than 1.4 million applications from individual investors to take part.

Kuaishou plans to price its IPO of up to $5.4 billion next week at the top end of the marketed range next week, in what is shaping up to be the biggest such market debut in Hong Kong in two years.

The Tencent Holdings-backed company will price the shares at HK$115 apiece, two people familiar with the transaction said.

The retail portion for individual investors closed at noon on Friday Hong Kong time and had record bids equal to nearly 1,240 times the shares on offer, these people said.

The applications are the equivalent of nearly one in every five Hong Kong residents, bidding for  total of about 1.3 trillion Hong Kong dollars ($165 billion) in shares.

The institutional part of the offering closed early on Wednesday. It attracted commitments of $2.45 billion from 10 cornerstone investors, including BlackRock, Singapore investment company Temasek and Fidelity, and closed early on Wednesday.

Kuaishou is a rival to ByteDance-owned Douyin, the Chinese version of TikTok.

Alvin Cheung, associate director at Prudential Brokerage, said its IPO plans had received "an overwhelming response." He said before the offering closed: "Kuaishou is going to break the previous records of Yidu Tech... in terms of number of retail investors and subscription sum."

Yidu Technology, another Tencent-backed company and provider of artificial intelligence and big data products to the health care industry, had a $531 million IPO earlier this month in which the retail portion was subscribed 1,634 times. It received 1.17 million applications worth HK$672 billion.

The now cancelled Ant Group IPO, which would have been the world's largest, attracted 1.55 million retail applications for bids worth HK$1.3 trillion late last year.

Investors' hunger for the string of share offerings is attributed to their desire to participate in some of the fastest growing parts of the Chinese economy amid a flood of liquidity, cheap borrowing costs and hopes that COVID-19 vaccines will boost risk assets, analysts said.

Kuaishou had raised its valuation after pre-deal discussions with prospective investors, people familiar with its plans said.

Kuaishou marketed the IPO at a price range of HK$110 to HK$115 a share. That gave the company a valuation of $60 billion at the top end, the deal term sheet showed. If underwriters took up the 15% overallotment option, the market capitalization could rise to as much as $61.7 billion.

That would double the level at which the video platform was valued a year ago when it privately raised about $5 billion, according to the people familiar with the transactions.

A Kuaishou spokesperson said she did not have information on the pricing.

Kuaishou is selling only 9.1 million shares to retail investors in the IPO -- just 2.5% of the transaction -- although this allocation will increase 6% if the retail portion is subscribed 95 times or more, according to the prospectus.

Several banks and brokerage firms have reported wide demand.

HSBC Holdings had over HK$200 billion of applications from retail investors, pushing the lender to increase its allocation to the IPO from the originally planned HK$150 billion, a spokeswoman said.

Bright Smart Securities & Commodities Group has already allocated HK$44 billion of the HK$50 billion it had originally earmarked, while Futu Securities said more than 200,000 investors have placed HK$42 billion worth of bids through its platform.

Prudential Brokerage has exhausted its HK$20 billion allocation, Cheung said.

The allocation results and final level of subscription will be released on Feb. 4, a day before Kuaishou's trading debut.

Kuaishou reported an adjusted loss of 7.2 billion yuan ($1.1 billion) for the first nine months of 2020 compared with an adjusted profit of 1.8 billion yuan in the same period a year earlier, after its selling and marketing expenses surged as part of an effort to build its brand.

Revenue climbed 49% to 40.6 billion yuan over the same period, according to its prospectus.

Additional reporting by Stella Wong and Nikki Sun.

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