China’s NetEase to raise $3.2b in Hong Kong listing

Chinese internet firm NetEase is looking to raise up to HK$24.5 billion (US$3.2 billion) when it debuts in Hong Kong on June 11.

Photo credit: Raysonho @ Open Grid Scheduler / Grid Engine

In its Hong Kong public offering, the gaming giant plans to offer a total of 171,480,000 shares for up to HK$126 apiece to raise HK$21.3 billion (US$2.8 billion). Of that total, 5.15 million shares will be offered locally, with the remaining to be offered internationally, according to a prospectus filed June 2.

Assuming that the overallotment option is exercised, the offering will have a total value of around US$3.2 billion.

In the prospectus, NetEase said it will use about 45% of the proceeds for its global expansion plans. This includes further investments in Japan, the US, Europe, and Southeast Asia. The company also plans to set aside another 45% for research and development, while the rest will go to general corporate purposes.

NetEase is only the second company to launch a secondary listing in the city, following Alibaba’s successful Hong Kong IPO last year. Ecommerce major JD.com is expected to follow suit on June 18 to raise up to US$3 billion by selling 5% of its shares, Reuters previously reported.

Recently, the US Senate passed a bill that bans companies from listing on US exchanges if they fail to comply with audits for three years in a row. In its filings with the Hong Kong stock exchange, NetEase cited the legislation as a potential risk for investors.

In January 2020, reports also surfaced that several other Chinese tech giants are eyeing secondary listings in Hong Kong as tensions between the US and China continue to rise. Those companies include search engine Baidu, fast-food chain operator Yum China, and travel services provider Ctrip.

At the time, the companies were holding talks with global investment banks. However, it’s still unclear how the Covid-19 pandemic has shifted these plans.

Update (June 2, 3:50 pm): This article was updated to include details from a NetEase prospectus dated June 2.