Tencent-backed Kuaishou Technology, a major rival of short video platform TikTok, delivered its initial public offering prospectus to the Hong Kong Stock Exchange Thursday evening. The filing didn't detail the scale of funding it seeks to raise.
Kuaishou was valued at over $30 billion regarding a recent funding round. Analysts project it will raise $5 billion in funding and could increase its market value to $40 to $50 billion in the listing, which could take place early in 2021.
"Anchored" To The livestreaming Business
Kuaishou saw 8.3 billion yuan ($1.25 billion), 20.3 billion yuan and 39.1 billion yuan in total revenues from 2017 through 2019. Livestreaming is its most profitable business. During the same time, the company received 7.9 billion yuan, 18.6 billion yuan and 31.4 billion yuan, respectively, in livestreaming revenues, according to its prospectus.
The coronavirus pandemic boosted its already popular livestreaming segment, when allegedly as many as 302 million average daily active users and 776 million monthly active users were on the platform to seek entertainment and social interaction. It relies on its anchors, 56% of whom were born post-1990s to tap into the livestreaming audiences, which are 63.4% under the age of 30, according to information provider Statista.
As of the first half year of 2020, the company reported 17.3 billion yuan in livestreaming revenues, accounting for 68.5% of the total 25.3 billion yuan of company's revenue, while it relied upon livestreaming for 95.3% in 2017.
Kuaishou said if the company can't continue expanding the livestreaming user scale or increasing the revenue in this segment, its financial performance will likely be negatively affected, according to its prospectus.
Turbulent Waters
The same day it filed for its Hong Kong initial public offering, Kuaishou announced on its social media that it cracked down on 395 accounts for "maliciously disturbing livestreaming environment." One Kuaishou account user was arrested by police for using the platform in making a "seriously inappropriate speech."
In July, the company had permanently closed down up to 1,400 livestreaming accounts and tackled 6 "severely malicious" accounts in coordination with the police force.
China Cyberspace Administration associated with National Radio and Television Administration and other six national regulator bureaus have closely scrutinized livestreaming anchors' "vulgar performance" in return for money rewards since early this year.
Regulation rules over rewarding anchors in the livestreaming sector are expected to be issued by the end of this year, according to the authority's statement on the Oct. 28 annual conference of livestreaming e-commerce and short video development.
Enduring The First Wave
In the first half of 2020, Kuaishou lost 68.1 billion yuan and the adjusted net loss was 6.3 billion yuan according to non-IFRS financial measures. This was its first loss after profit earnings of 777 million yuan, 182 million yuan and 1.3 billion yuan from 2017 through 2019.
The company said in the prospectus that there is a possibility it won't return to a profit level.
Analysts said the company made unprecedented expenses on advertisement to absorb more young users from 1st- and 2nd- tier cities while strengthening its initial targeted users in 3rd- and 4th- tier cities.
During the first half year, Kuaishou's advertisement and promotion expenses reached 13.3 billion yuan, including 4 billion yuan in exclusive collaboration with CCTV Lunar New Year Gala and 1 billion yuan as "red envelope" to the national audience.
According to statistics released by China Internet Network Information Center as of this March, there are 560 million domestic livestreaming users nationwide, accounting for 62.0% among the total netizens, for four main kinds of livestreaming activity: game livestreaming; sports livestreaming; reality show livestreaming and concert livestreaming.
The company said the raised funds will enhance its ecosystem and diversify revenue streams via e-commerce business, online games, online knowledge-sharing and other products and services. It will also strengthen research and development and technology, according to the filing.
