Kuaishou is tapping the zeitgeist as well as the capital markets. The group caters to public demand to watch vloggers lip synching in real time to pop tunes. Its initial public offering in Hong Kong has lured another contemporary crowd: retail investors desperate to pile into the latest hot stock.
Shares nearly tripled on their first day of trading in Hong Kong. Retail investors who bought early did very nicely. Company founders Su Hua, a former Google developer, and his friend Cheng Yixiao became billionaires. Kuaishou’s biggest rival, ByteDance, also has reason for satisfaction.
Friday’s pop gave the company a market capitalisation of $160bn — just $20bn below where ByteDance was valued at by its last private funding round. The market reception for livestreaming specialist Kuaishou bodes well for a future IPO of ByteDance. This will be more tempting now that TikTok’s parent company has a listed competitor to use as a comparison.
Kuaishou is popular but it has less than half as many users as Douyin, the Chinese version of TikTok run by ByteDance. Sales, at $6.3bn in the first nine months of last year, have yet to catch up too. ByteDance's revenues are reported to be more than $30bn for the full year.
Douyin has the edge, for the moment. It has a stable stream of ad revenues, especially from large corporate clients. It is less exposed to Beijing’s tightening control on virtual gifting on livestreaming platforms.
Both Kuaishou and ByteDance faced serious medium-term threats. Smaller rivals have been growing rapidly, swiping market share and ad dollars. Kuaishou shares, which trade at an enterprise value-to-sales ratio of 15 times, already look pricey by local tech standards. The valuation includes a premium of a quarter to tech giant Tencent, which holds a stake of about 22 per cent in Kuaishou.
In the short term, none of that matters much to the market. Retail investors bid $163bn in hopes of sharing a small slice of the company. That suggests momentum will be maintained. Those that missed out will soon be using refunds to join the party.
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