(Bloomberg) -- In China’s popular online-streaming industry, virtual gift-giving is big. You can send your favorite live performer anything from a rose for 5 yuan (80 cents) to a space rocket for 500 yuan.The present is just a symbol, but the money is real -- and that’s what’s made Kuaishou Technology so successful.The ByteDance Ltd. rival has become the biggest live-streaming platform for virtual gifts, with more paying monthly users than any other in the world. The firm, which takes a cut of the tips fans give to performers, raised $5.4 billion in Hong Kong in the biggest internet initial public offering since Uber Technologies Inc. in 2019, terms for the deal obtained by Bloomberg show.That’s poised to create at least four billionaires with a combined fortune valued at $15 billion, based on the ownership disclosed in Kuaishou’s prospectus. Co-founders Su Hua and Cheng Yixiao will each be worth more than $5.5 billion, according to the Bloomberg Billionaires Index.Kuaishou, which means “fast hand,” is one of China’s biggest internet success stories of the past decade, part of a generation of startups that thrived with backing from Tencent Holdings Ltd. Along with TikTok parent ByteDance, the outfit pioneered the live-streaming and bite-sized video format that’s since been adopted around the world by the likes of Facebook Inc.“The key resource of the internet is attention,” Su wrote in Kuaishou’s official biography in 2019. “It can be focused on large numbers of people like the sunlight, rather than a spotlight just on a certain group of people. That’s the simple logic behind Kuaishou.”Su, a native of China’s central Hunan province, studied computer programming at the prestigious Tsinghua University before joining Google in Beijing in 2006. There, he earned about $23,000 annually, eight times the country’s average salary back then. While he said he was “extremely happy,” a stay in Silicon Valley inspired him to start his own business, according to Kuaishou’s biography.The 38-year-old quit Google during the global financial crisis to start his own video-advertising venture, which didn’t come to fruition. After a short stint with Baidu Inc., he got acquainted with Cheng in 2011 and they soon decided to pair up. In 2013, the duo transformed the Kuaishou app from a GIF-maker to the social-video platform it is today, initially gaining popularity with its videos of life in rural China.With the rise of ByteDance’s Douyin, the Chinese twin app of TikTok, Kuaishou broadened its appeal, luring influencers backed by talent agencies and pop stars like Taiwan’s Jay Chou. Along the way, it sped up monetization by creating ad slots and in-app stores for brands and merchants.While virtual gift purchases are still its bread and butter -- they make up almost two-thirds of its revenue -- the company is delving deeper into higher-margin businesses like e-commerce and online gaming. Its sales rose almost 50% to 40.7 billion yuan in the first nine months of last year, according to the IPO prospectus.Viewers spend an average of almost 90 minutes on Kuaishou every day, and about a quarter of monthly users churn out content as well. While that robust engagement differentiates Kuaishou from rival live-streaming platforms such as Joyy Inc. and Momo Inc., the recent launch of a short-video feed by Tencent’s super-app WeChat has brought competition to another level.Kuaishou’s debut could also be overshadowed by the potential IPO of its far larger rival, ByteDance, whose 600 million Douyin daily users are more than double Kuaishou’s. Last valued at $180 billion, the world’s largest startup was said to be exploring a listing of some of its businesses in Hong Kong as the U.S. last year attempted to ban TikTok and force a sale of the app on national-security concerns.“Kuaishou has overhauled its product and become more similar to Douyin,” said Citic Securities Co. analyst Wang Guanran in a Jan. 26 note. “The two will face direct competition with each other in the future.”Kuaishou isn’t immune to geo-political tensions either. While Su told investors on a Jan. 25 call that non-Chinese markets have the potential to become a big earnings driver, its platforms including Kwai and Snack Video are banned in India along with hundreds of Chinese apps as New Delhi and Beijing clash over border disputes. In the U.S., its TikTok-style Zynn service has gained little traction since launching last May.The company will also have to deal with a recent crackdown on live-streaming. China said in November it would require performers and gift givers to register with their real names, banned minors from tipping and asked the platforms to limit the value of virtual presents.Still, investors have been rushing to get a piece of the first short-video platform that will start trading Feb. 5. The IPO priced at the top end of its marketed range, and the retail portion was the most subscribed ever, according to IFR, as the city’s market for new listings has been on fire lately. Some shares changed hands at more than double the listing price of HK$115 in gray-market trading on Monday, people with knowledge of the matter said.The enthusiasm last year boosted the fortunes of top executives including those at Nongfu Spring Co.’s Zhong Shanshan -- now Asia’s richest person -- and Blue Moon Group Holdings Ltd.’s Pan Dong.The Kuaishou founder is cautious about the power he’s amassed. In the company’s biography, Su compared his platform’s ability to control internet attention and traffic with the One Ring from J.R.R. Tolkien’s “The Lord of the Rings” trilogy.“When you put on the ring, you’ll feel extremely powerful,” he wrote. “But in fact, it’s the ring and the power that are controlling you.”(Updates with gray-market trading in 16th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
China's largest brokerage CITIC Securities is set to get an underwriter's role for the Shanghai tranche of financial technology firm Ant Group's up to $30 billion dual-listing, four people with knowledge of the matter said. Ant, backed by Chinese e-commerce giant Alibaba plans to do a simultaneous listing in Hong Kong and Shanghai, in what sources have said could be the world's largest initial public offering (IPO) and come as soon as October. CITIC, which has in actively pitched for a role in Ant's listing on Shanghai's Nasdaq-style STAR Market, is set to become a joint underwriter for the onshore leg, said three of the people.
(Bloomberg) -- The 50-year old Hang Seng Index is poised to embrace change, and it couldn’t come soon enough for investors forced to put up with years of dismal underperformance.On Monday at around 4:30 p.m. in Hong Kong, the compiler of the gauge is expected to announce whether companies with secondary listings and unequal voting rights will be included for the first time, namely Alibaba Group Holding Ltd. Doing so would open the door to transforming the Hang Seng from a gauge overstuffed with banks and insurers to one that better reflects the technological dynamism of China’s economy.Alibaba -- one of China’s most valuable companies -- launched a secondary listing in Hong Kong in November. Another potential candidate for inclusion is Meituan Dianping, China’s largest food-delivery website, while JD.com Inc. is considering a secondary listing of its own in the city. With almost $30 billion of pension-fund assets and exchange-traded funds tracking the gauge as of December, such a change could spur a flood of local share sales by U.S.-listed firms.“The decision is going to completely change the nature of index, which has been characterized as one with low valuation and low growth rate for a long time,” said Yang Lingxiu, strategist at Citic Securities Co.About half of the total weighting of the Hang Seng Index is in financial firms, compared with about 15% on average for benchmarks in Europe, the U.S., Japan and mainland China, according to data compiled by Bloomberg. The gauge has gained 1.7% a year on average in the past decade, versus 5.2% for the MSCI All-Country World Index. In January, the Hang Seng approached its lowest level relative to the MSCI measure since 2004.The process of adding the likes of Alibaba may take some time, however. “In order to reduce the one-off impact on the market, the index may propose adding the weight of Alibaba gradually,” said Chi Man Wong, analyst at China Galaxy International Financial Holdings. Alibaba is the biggest company listed in Hong Kong by market cap and is the second most actively traded stock in the past 30 days, just after the Hang Seng Index’s largest component Tencent Holdings Ltd., according to data compiled by Bloomberg.The index would need to delete two companies to add Alibaba and Meituan, as current rules require the number of firms on the gauge to be fixed at 50. Component maker AAC Technologies Holdings Inc. and snack firm Want Want China Holdings Ltd. are among likely candidates for deletion due to their smaller market capitalization, according to traders.The addition would raise the Hang Seng Index’s forward price-to-earnings ratio to about 12 from the current 11, making it more expensive than Shanghai Composite Index, data show.Ultimately, the weight of technology and consumer discretionary sectors’ could surge from the current single digits to more than 30%, if all U.S.-listed Chinese companies that match the Hang Seng’s requirements list in the city and are included in the index, according to Citic Securities Co.To be sure, giving greater weight to companies with unequal voting rights could raise investor concerns.“The key issue is that weighted voting rights create an opportunity for someone to have greater influence than their economic ownership would suggest,” said Gabriel Wilson-Otto, head of stewardship Asia Pacific at BNP Paribas Asset Management. “The underlying concern is that this heightens the potential for agency risk, and reduces avenues of recourse if the company does something that’s not in the best interests of the minority shareholders.”Investors in some U.S-listed Chinese firms have recently been burned by accounting scandals, raising questions about the standard of corporate governance at some companies.Two Accounting Scandals in a Week Burn China Inc. Investors (1)The Hang Seng Index would nevertheless benefit from luring more U.S.-listed companies, said Cliff Zhao, head of strategy with CCB International Securities Ltd.“More funds will be attracted to follow the index, which is a good thing for Hong Kong’s stock market.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.