The music-streaming arm of Chinese Internet company NetEase Inc. began taking investor orders for its Hong Kong initial public offering, turning to its parent company and other large backers to ensure the deal was completed. Most of the demands required.
Cloud Village Inc’s listing comes at a challenging time for China’s technology industry, as government action and slowing economic growth have put pressure on many Chinese tech stocks.
Hong Kong’s Hang Seng Tech index is down nearly 24% this year, and US depository receipts from sector heavyweight Alibaba Group Holding Ltd closed at a multi-year low on Monday. On the other hand, NetEase’s own shares have risen 22% this year, according to data from FactSet.
Cloud Village said it plans to raise up to $3.52 billion, which equates to $451.9 million, the company said. It plans to sell 16 million shares at HK$190 to HK$220.
The company, which operates a music-streaming platform similar to Spotify Technology SA, first filed for an IPO in Hong Kong in late May and plans to take investor orders in the first half of August. But the deal was pulled on August 9 after a massive sell-off in Chinese internet-technology stocks, triggered by a wave of regulatory action by Beijing against several new-economy companies.
Earlier this month, Cloud Village revamped its IPO prospectus and is now expected to finalize the IPO price on Friday. Shares are expected to start trading on the Hong Kong Stock Exchange on December 2.
The Wall Street Journal and other news outlets have reported that Cloud Village previously planned to raise about $1 billion.
Three Cornerstone investors have committed to buy $350 million of shares in the offering, representing about 83% of the total deal at midprice, a term sheet seen by the Journal showed.
NetEase is investing $200 million, Sony Music Entertainment $100 million and Orbis Investments $50 million, as shown in the term sheet.
Cornerstone investors are a common feature of large Hong Kong IPOs. They commit to buy a set dollar amount of shares anywhere in the range of deal prices, and hold them for six months or more, others serving to support the deal. However, they typically account for a much smaller portion of the entire deal than is the case, often buying around one-third of the stock on offer.
Cloud Village is a smaller rival of Tencent Music Entertainment Group, a US-listed subsidiary of Tencent Holdings Ltd. The business will remain a subsidiary of NetEase once it goes public.
Cloud Village said in its listing prospectus that 185 million users connected to its online music platform NetEdge Cloud Music at least once a month during the first half of 2021, and 26 million users were paying for its services monthly. It said Tuesday that it plans to use the net proceeds from the IPO to improve its technology, grow its business, and fund “selected mergers, acquisitions and strategic investments.”
This story has been published without modification to the text from a wire agency feed
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