Fri. Oct 30th, 2020

HONG KONG — Chinese online video startup Kuaishou, the Tencent Holdings-backed challenger to the domestic version of ByteDance’s TikTok, is preparing for an initial public offering that would value the company at around $50 billion, according to three people familiar with the situation.

The company, which runs its eponymous app in China as well as the Kwai and Zynn apps in overseas markets, has hired Bank of America and investment bank China Renaissance, among others, as sponsors for its IPO and could file a preliminary prospectus with the Stock Exchange of Hong Kong next month, the people said.

While the company has not yet finalized how much of a stake would be sold through the IPO, if it offered the typical 10% shareholding to the public, that could yield proceeds of $5 billion or more.

Kuaishou’s investors, which include the Chinese arm of U.S. fund Sequoia Capital, Singapore sovereign fund Temasek Holdings and Jack Ma-backed private equity company Yunfeng Capital, could offload some of their stakes, the people familiar with the deal said.

Tencent invested $2 billion last year when the company raised $3 billion at a valuation of $29 billion, according to Chinese media.

Kuaishou’s IPO plans come as new listing volumes surge in Hong Kong. More than $21 billion has been raised by companies through IPOs and secondary listings so far this year, with five new-share sales currently open for subscription.

China Bohai Bank holds the title of the largest Hong Kong IPO so far this year, after raising $2 billion in July. However Ant Group’s IPO in Hong Kong and Shanghai, expected in October, is shaping up to be the world’s largest ever at $30 billion.

The company’s plans are shaping up as ByteDance’s TikTok app has become a target of U.S. President Donald Trump amid continuing political tensions between Washington and Beijing. He has threatened to ban TikTok on national security concerns, forcing ByteDance to enter a partnership with Oracle.

Beijing-based Kuaishou started out as a GIF generator tool in 2011 and has now become the second-largest short video app in China after ByteDance’s Douyin, with around 170 million daily viewers.

Like Douyin, Kuaishou has been seeking to monetize traffic to its app via e-commerce. Kuaishou’s online shopping platform generated 500 million orders in August, Caixin Media reported.

Kuaishou’s offering size, timing and price targets will be determined after consulting potential investors and will be subject to market conditions, the people said. While the plan is to list the stock this year, the company is open to waiting until the first quarter of next year, too, they said.

“Given the size of the offering, more banks are set to join the float as arrangers closer to launch,” one of the persons familiar with the deal said. “We are currently racing to complete the prospectus.”

The company declined to comment on its IPO plans, which were first reported by technology website The Information.

Additional reporting by Coco Liu.

By Bureau