If you’re looking for the next huge IPO along the lines of something ... Uber … look to this quirky tech company that’s shockingly not targeting young and trendy urban users, but farmers, instead.
And it’s not the FarmersOnly dating app.
It’s Chinese, and it’s shaping up to be the biggest tech IPO since Uber went public in 2019.
Chinese Kuaishou (Beijing Kuaishou Technology Co. Ltd) is the pioneer of short videos, and it's backed by Chinese giant Tencent. If you haven’t heard of it, it should probably be on your radar. It debuted Friday in Hong Kong and hit a $160-billion valuation hours later.
It’s main competitor? You guessed it … TikTok’s Chinese twin “Douyin”.
Kuaishou was expected to raise $5.4 billion from the sale of 365 million shares, which would make it the biggest tech IPO in the world since Uber went public for $8.1 billion in May 2019.
ByteDance, the owner of TikTok, was valued at $180 billion the last time it raised cash, and the competition will heat up significantly if it goes through with plans to list in Hong Kong this year, as well.
“For a sizeable IPO like this one I can’t recall any . . . reaching this sort of extraordinary performance,” Ronald Wan, chief executive and founder of Hong Kong investment firm Partners Capital, was quoted as saying by the Financial Times.
While the competition will be still, Kuaishou has a niche: It’s focusing on an entirely different user base, with 85% coming from lower-tier cities and more rural areas. And it’s got more daily active users than even Twitter or Snapchat.
Outside of China, it has been a complete unknown until its stunning Hong Kong debut when $160-billion perked up a lot of investor ears. But within China, what started in 2011 as a GIF-making tool, according to Protocol, has become a hugely popular short-form video and live-streaming platform that has big plans for ecommerce and gaming distribution.
Douyin has some 600 million daily active users, as of August 2020, while Kuaishou has 776 monthly active users.
But what’s attractive to investors is the online shopping element to this short-form video streamer.
Protocol describes it as “part Twitch, part QVC”, and that’s a potentially lucrative vertical where influencers host live events to promote their products and Kuaishou gets a commission on anything sold via the platform. At the same time, it’s set up so that merchants can also sell through third parties due to partnership deals with giant ecommerce names such as JD.com and Alibaba.
Could anything go wrong?
Yes, this is China, and the Communist Party is on one hand feeding its tech giants to get Beijing closer to global tech dominance, and on the other hand trying to put these unruly beasts back in their cage where they can control them. It’s a tricky balancing act that has recently brought tech leaders (particularly, Ant Group’s Jack Ma) into direct conflict with the country’s leadership. That means that there is a significant amount of regulatory uncertainty for any big tech company, and with this stunning IPO, Kuaishou will be under intense scrutiny.
By Michael Kern for Safehaven.com