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Strong Hong Kong Debut For Tencent-Backed Chinese Short Video Firm Kuaishou

Strong Hong Kong Debut For Tencent-Backed Chinese Short Video Firm Kuaishou
Following a $5.4 billion initial public offering (IPO) by Kuaishou Technology on Friday, the shares of the tech firm increased by three-fold at the Hong Kong stock market.
According to analysts this surge in demand for the company’s shares reflect a global retail trading frenzy which drew in huge demand from mom-and-pop investors for the Chinese online video service operator.
This strong debut, which was one of the largest, of the Chinese tech firm is however one in many such strong debuts in recent times in the Asian financial hub and analysts say that this is an encouraging sign for other companies seeking to benefit from the upswing in the market. However analysts also are worried of a possible asset bubble emerging in the market.
Compared to the initial public offering price of HKUS$115 a share, the stocks of Kuaishou shares opened at HKUS$338 ($43.60) and increased to as much as HKUS$345 ($44.50). the market value of the company touched just over $180 billion at one point of time during the day which made it the fifth largest listed company in Hong Kong in terms of market capitalisation.
Since Budweiser's Asia unit’s IPO that raised $5.75 billion in 2019, this IPO was the largest for the stock exchange in Hong Kong. Retail investors bid for 1,204 times the amount of Kuaishou shares on offer for them in the IPO, mostly backed by borrowed money.
According to Louis Tse, managing director of brokerage Wealthy Securities, demand for the company’s shares from customers in mainland China, who are not allowed to make investments in IPOs but can purchase shares from the secondary market, as well as retail investors in Hong Kong who were unable to get shares in Kuaishou's IPO, were the primary drivers for the surge in Kuaishou shares on Friday.
Tse added that there was also demand from retail investors who were eager to lap up shares of Ant Group's blockbuster $37 billion dual-listing which was suspended at the last minute in November last year, also contributed to the surge in stocks of Kuaishou.  
"This bodes well for other Hong Kong IPOs, if the companies are well known on the mainland," he said.
According to report last year, consideration of listing its onshore Chinese short video app Douyin in Hong Kong is also being made by TikTok’s Chinese owner Bytedance.
Douyin and Kuaishou are rivals.
The prospectus of Kuaishou claimed that as of the first nine months last year, it was the second largest short video platform of the world. During that period, there was an average of 275.9 million daily active users on its platform, according to the company’s prospectus since people were forced to stay back home and short video platform because of the pandemic related restrictions.
The access to Kuaishou’s platform is free and the company’s revenues primarily come from selling of virtual items which can be gifted by users to the makers of the short videos. It also makes money from online marketing and commissions from e-commerce sales on the platform.

Christopher J. Mitchell

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