Tencent Rival Sees $2.6 Billion Offering -- WSJ
June 02 2020 - 3:02AM
Dow Jones News
NetEase is latest China tech company to plan Hong Kong listing
amid U.S. push for scrutiny
By Joanne Chiu
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 2, 2020).
Mobile-gaming group NetEase Inc. has begun taking investor
orders for a multibillion-dollar Hong Kong share sale, as momentum
builds for U.S.-listed Chinese companies to obtain secondary
listings closer to home.
The Nasdaq-listed group's secondary offering in Hong Kong comes
after a roughly $13 billion Hong Kong debut by Alibaba Group
Holding Ltd. last year, and is likely to be followed by another
stock sale in the city by Chinese e-commerce group JD.com Inc.
NetEase and JD.com are pursuing Hong Kong listings as U.S.
lawmakers push for greater financial scrutiny of Chinese companies
who trade on American exchanges.
NetEase on Monday said it is selling 171.48 million new shares
ahead of a trading debut in Hong Kong on June 11 under the stock
code 9999.HK. Based on Friday's closing price for its American
depositary receipts, it could raise about $2.6 billion, a term
sheet from one of the banks handling the deal showed.
It will set the final offer price on Friday based on the last
closing price for its U.S. securities and on market demand.
The online-gaming company, a rival to Tencent Holdings Ltd., set
a maximum offer price for its shares of HK$126 each ($16.25) for
the small part of the offering reserved for individual investors.
The final offer price for the international tranche, which accounts
for most of the total stock sale, could be higher.
China International Capital Corp., Credit Suisse and JPMorgan
are the deal's joint sponsors, or the most senior banks on the
deal. The underwriters would have the option to increase the deal's
size by up to 15%, after the listing, depending on market
conditions. That would raise the deal size to $3 billion, the term
sheet showed.
NetEase joined the Nasdaq in 2000. Its American depositary
receipts have risen nearly 25% this year, giving it a market
capitalization of more than $49 billion as of Friday. Each
depositary receipt is equivalent to 25 ordinary shares.
This is a sensitive time for U.S.-listed Chinese companies. The
U.S. Senate passed a bill in May that could kick Chinese companies
off U.S. stock exchanges unless their audits are inspected by the
U.S. Securities and Exchange Commission's audit-watchdog arm.
Hong Kong's stock exchange in 2018 revamped its rules to court
more listings from technology and biotechnology groups.
"I believe that returning to a market that is closer to our
roots will further fuel our passion in our business and our users,"
William Ding, NetEase's founder and chief executive, said in a
letter to investors that was included in the group's listing
document.
NetEase said it plans to spend some of the proceeds on expanding
its online-game offerings in overseas markets including Japan, the
U.S., Europe and Southeast Asia, and some on technology.
In the January-to-March period, NetEase's net revenue rose 18.3%
from a year earlier, to $2.4 billion, while net income from
continuing operations increased 49% to $501.5 million.
Write to Joanne Chiu at joanne.chiu@wsj.com
(END) Dow Jones Newswires
June 02, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.