NetEase’s music app raises USD422m in Hong Kong IPO

The listing comes as China tightens control over its data
Chief Investment Office29 Nov 2021
    Photo credit: AFP Photo


    The music streaming arm of Chinese gaming giant NetEase Inc raised USD422m its Hong Kong initial public offering (IPO), pricing the shares at the midpoint of a marketed range.

    Cloud Village Inc sold shares at HKD205 (USD26.30) apiece, according to terms of the deal obtained by Bloomberg. The company had marketed 16m shares for HKD190 to HKD220 apiece, according to a preliminary prospectus. The shares will start trading on 2 December.

    Cloud Village revived plans for an IPO after putting the listing on hold earlier this year, delaying it just days after the company began gauging investor demand. It had been pursuing an IPO of about USD1b, Bloomberg News reported in May.

    The listing comes as China tightens control over its data, introducing a draft new rule that would require Hong Kong IPO candidates to undergo a cybersecurity review if the data they amassed could impact national security. Cloud Village’s prospectus offered a lengthy analysis of the potential risks of the new regime, and said it has not been involved in any investigation, nor has it received any inquiry or notice in relation to the new rule.

    Cloud Village runs NetEase’s music streaming platform in China and generates most of its revenue through subscriptions, virtual gifting, and advertising. Started in 2013, the music wing has since expanded its products to offer everything from online karaoke to live-streaming and lyrics sharing.

    The unit grew its monthly music users to 185m in the first six months of 2021, according to the preliminary prospectus. Revenue rose 61% to CNY3.2b (USD501m) for the six months ended June, while net loss more than tripled to CNY3.8b for the same period.

    The company is still deep in the red in part because of costs stemming from its fierce rivalry with Tencent Music Entertainment Group. Cloud Village said in the prospectus that it has been negotiating deals with a number of music labels, after antitrust regulators in July ordered Tencent to give up its exclusive licensing agreements with big record companies. – Bloomberg News.

    On Friday (26 November), the Hang Seng Index tumbled 2.67% to 24,080.52 while the Shanghai Composite Index dipped 0.56% to 3,564.09.



    Asia’s stock benchmark was on track for its worst day since March on Friday (26 November), as worries over the economic impact from a new Covid variant sparked a global rout that was exacerbated by thin liquidity.

    The MSCI Asia Pacific Index slumped as much as 1.9%, with consumer discretionary and financials being the biggest drags. Hong Kong and Japan equities tumbled to lead losses in the region, with some traders away for Thanksgiving celebrations. US futures extended declines, with contracts on S&P 500 and Dow Jones falling by more than 2%, while volatility spiked.

    The variant recently discovered in South Africa carries an unusually large number of mutations and is “clearly very different” from previous incarnations, Tulio de Oliveira, a bio-informatics professor who runs gene sequencing institutions at two South African universities, said at a briefing on Thursday.

    The latest virus concerns deal a fresh blow to Asian equities already hurt by worries over weak earnings prospects, an economic slowdown in China, and supply chain concerns. Down more than 3% this year, the regional gauge looks poised to end lower for 2021, even as peers in the US and Europe have climbed at least 16% each.

    “Even before this news, virus cases were back on the rise in the US and Europe, so investors are now wary of the possibility that, with a new variant, infections could spread all at once,” said a market watcher. – Bloomberg News.

    Australia’s S&P/ASX 200 Index opened flat at 7,279.30 on Monday morning, after losing 1.73% to 7,279.30 the previous session.

    South Korea’s Kospi Index slipped 0.67% to 2,916.72 in early Monday trading. It closed 1.47% lower at 2,936.44 the previous session.

    The Taiwan Stock Exchange Weighted Index fell 1.61% to 17,369.39.

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