Hong Kong IPO fever is not over, yet. Kuaishou, the biggest rivalry of TikTok, is looking to raise US$5.4bn in Hong Kong IPO this week. Because of the failure of Alibaba’s ANT IPO which was valued at US$313 billion, Kuaishou’s IPO is going to be the world’s biggest internet IPO since Uber’s $8.1 billion U.S. share sale in May 2019.

This brings Kuashou’s valuation to US$50 Billion. Comparing to its listed peers, the market capitalization of Bilibili is at US$43bn and the value of iQIYI is at US$16bn.

Who is Kuaishou?

Thanks to Donald Trump, the whole world got to know China’s famous short video platform TikTok (Douyin in Chinese). But not many foreigners are familiar with Kuaishou.

Kuaishou (literally means “Fast Hand” in Chinese) is among the most popular video-sharing platform which has an average of 262 million active users per day. The main company is called Beijing Kuaishou Technology Co Ltd, which was backed by Tencent.

Why Kuaishou IPO is a big deal?

Last week, I wrote that “the stock market is finally moving at its full speed towards an epic bubble”. Besides dizzying stock valuations, another common phenomenon during the euphoria stage is the IPO mania. If you have a private company and what to cash out, is there a better time than now?

Investors today don’t study the stocks they buy, they only trust Wall Street stories. Have these words started appearing in your feed lately: Cryptos, EV (Electric vehicles), ESG or SPAC (Special Purpose Acquisition Company)? Put a fancy name and you will have followers.

A quick look at the financial statement of Kuaishou will reveal that the company was still losing money.

Source: Bloomberg

But who cares? Tesla was losing money too and they are the king stock now. And it is not only the moms-and-pops who are lured into this mania. The institutions are in the game too, be it voluntary or forced to.

It is reported that Kuaishou secured several high-profile cornerstone investors who are buying $2.45B of the $5.4B IPO. That is nearly half! They include

  • Capital Group (American Funds),
  • Temasek and GIC (Our Singapore sovereign wealth funds),
  • Invesco,
  • Fidelity,
  • CPPIB (Canadian pension fund),
  • Morgan Stanley, and
  • Abu Dhabi Investment Authority (sovereign wealth fund).

So you see, this game is not over yet.

How does Kuaishou IPO affect other investments?

With this size, Kuaishou IPO will have a profound impact on the market now. Already, Tencent’s share rose more than 11% yesterday. But it doesn’t stop there.

With a US$50bn valuation. Kuaishou may be qualified for stock “Fast Entry” into some major indices. In this article, I briefly explain the “Fast Entry Rule”. At that time, only ANT IPO was qualified for this rule to join Hang Seng Tech Index. Now, there is a likelihood that Kuaishou will be the next one. This may give a boost to the Hang Seng Tech ETF as well.

At the same time, it seems that investors have finally recognized that the Hong Kong market is relatively undervalued comparing to the mainland Chinese shares. there is a huge inflow from China investors into the Hong Kong market (as shown in the chart below).

Even if I am a firm believer to invest in China’s stock market in the long run. Such mania will definitely cause more and more volatilities and you’ve got to know what you are investing in. It is interesting to see how these unfold in the end.

The Kuashou’s Hong Kong public offering commences today with an indicative price of HKD115 per share. The final pricing will be set around 28-29 January. The stock is expected to start trading on the HKEX (under code 1024 HK) on 5 February.

Update on 29/1/2021: Kuaishou’s retail tranche was more than 1,200 times oversubscribed, it is even more than the demand for beverage giant Nongfu Spring’s IPO. Kuaishou IPO sets the final offer price at HK$115 a share.

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About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
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