TikTok rival Kuaishou hits $160bn valuation as shares surge after IPO

Shares in Kuaishou nearly tripled on its first day of trading in Hong Kong, propelling the valuation of the Chinese video-streaming platform to $160 billion (€133 billion).

It brought the company’s market capitalisation to near that of ByteDance – the owner of Kuaishou’s chief rival, TikTok, and its Chinese sister app, Douyin – which was valued at about $180 billion at its most recent December fundraising round, according to a source directly familiar with the matter.

Kuaishou’s stock gained as much as 194 per cent on Friday after it raised about $5.4 billion in its initial public offering (IPO), the biggest in the tech industry since Uber raised more than $8 billion in 2019. It closed about 160 per cent higher.

“For a sizeable IPO like this one, I can’t recall any . . . reaching this sort of extraordinary performance” on day one, said Ronald Wan, chief executive and founder of Hong Kong investment firm Partners Capital.

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The first-day jump boosted the value of Kuaishou chief executive Su Hua’s 11.8 per cent stake in the group to almost $19 billion. The 9.2 per cent stake held by Cheng Yixiao, the company’s founder and chief of product, is also worth nearly $15 billion. The two men effectively control the company through a special class of stock with 10 times the voting power of ordinary shares.

Early-stage backer 5Y Capital holds a 13.7 per cent stake worth $21.8 billion. Its initial $1.3 million investment alone is now worth $13.8 billion – a 1,045,925 per cent gain that makes it one of the best venture capital bets of all time.

DCM Ventures, Kuaishou’s second outside investor, put in $50 million over several financing rounds for a stake now worth $12 billion.

“We thought short video would be big in China, but Kuaishou has exceeded our expectations and hence we’re in a happy place now,” said partner David Chao.

Faster networks

Cheng founded Kuaishou about a decade ago as a tool for users to create GIFs – short animated images – on smartphones. The company pivoted toward short videos as smartphone cameras and data networks became faster and more powerful.

More than 262 million Chinese users check the Kuaishou app an average of 10 times a day, spending 86 minutes on average watching videos and chatting with the creators who make them.

These interactions produce the app’s main revenue stream, as Kuaishou takes a cut of the tips viewers shower on content creators. These include small virtual gifts such as stickers that can cost up to 1,400 Chinese yuan (€180) each. Such tips contributed 62 per cent of Kuaishou’s revenue in the nine months to September last year.

Total revenue in the period rose 49 per cent from a year earlier to 41 billion Chinese yuan (€5.3 billion) as it reported an operating loss of 9 billion Chinese yuan (€1.2 billion).

Rival

ByteDance is also considering a listing this year in Hong Kong for some of its Chinese businesses, according to two sources directly familiar with the matter. Kuaishou’s buoyant debut could pave the way for its rival to move quickly for a listing with markets at historic highs.

ByteDance’s Douyin app had 602 million average monthly users in China last year, while Kuaishou had 460 million, according to Analysys.

Chinese tech companies face an increasingly-uncertain regulatory environment. The $37 billion (€30.7 billion) listing of payments firm Ant Group was halted by Beijing at the last minute in November, while its ecommerce affiliate Alibaba is under an antitrust investigation.

Livestreaming rules announced in November have tightened controls on tipping on platforms such as Kuaishou. Regulators are also scrutinising livestreaming ecommerce where video hosts promote goods to shoppers, a growing business for the company.

Kuaishou is one of many tech groups to benefit from Chinese internet group Tencent’s backing, which holds a 17.8 per cent stake. – Copyright The Financial Times Limited 2021