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Tencent-backed livestreaming startup Douyu ups its US IPO target

Chinese platform reports strong Q1 amid fierce battle with compatriot Huya

NEW YORK -- Douyu, an e-sports livestreaming platform backed by Tencent Holdings, on Monday raised the target for its Nasdaq debut after moving into the black for the first time last quarter.

The Wuhan, China-based startup filed to raise up to $629 million at $11.50 to $14 per American depositary share, while Douyu shareholders will be selling an additional $314 million worth of equity, according to Douyu's updated prospectus. The company previously sought a $500 million listing.

The increase in Douyu's IPO target comes as the company reported a $2.7 million profit on revenue of $222 million in the first three months of 2019 -- mostly from sales of virtual gifts to streamers and advertising. Last year, the company reported revenue of $544.5 million, double that of 2017.

Douyu is 43.1% owned by a Tencent subsidiary. Tencent also owns about a third of another Chinese livestreaming startup, Huya, which went public in 2018 on the New York Stock Exchange.

Tencent's stakes in both platforms is a sign the Chinese gaming giant is hedging its bets in the country's fast-growing livestreaming industry. According to market forecast by iResearch commissioned by Douyu, China's e-sports market is expected to grow at a rate of 24.7% per year to reach 39.8 billion yuan ($5.8 billion) by 2023. 

Douyu's and Huya's fundraising activities in the U.S., meanwhile, indicate that their competition will likely intensify. While Douyu reported more average monthly active users than its rival, Guangzhou-based Huya has the upper hand in revenue, which reached $678.3 million in 2018. 

"Encouragingly, Douyu's revenue growth caught up with Huya" in the first quarter of 2019, Arun George, an analyst at Global Equity Research, wrote in a note published on investment research platform SmartKarma. 

Though Douyu is known for its exclusive contracts with many of China's top streamers, Huya's users are more mobile-based and have a greater propensity to spend money on the platform compared to PC users, George told the Nikkei Asian Review. Douyu is growing its share of mobile users -- which accounted for a record 31% of all monthly active users in the first quarter -- as well as its ratio of paying users, according to the company's prospectus. 

Douyu and Huya, which both claim to be the No. 1 game livestreaming platform in China, are also eyeing expansion in overseas markets. In 2018, Douyu acquired Nonolive, a livestreaming platform in Southeast Asia. Huya started operating in Southeast Asia in 2018 through Nimo TV, which has also ventured into Latin America.

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