Kingsoft seeks to raise US$100m in initial offering
Mainland software and online game developer Kingsoft Corp planned to raise US$100 million from a listing in Hong Kong in the third quarter, market sources said.
Lehman Brothers and Deutsche Bank are underwriters of the deal, according to the sources. Kingsoft officials declined to comment.
Kingsoft has decided against following the path of rival online game companies such as Netease, Shanda and The9, which have opted to list on the Nasdaq. Instead, it has turned to Hong Kong because it has a cheaper listing process. The company also believed a New York listing no longer garnered a higher valuation, said a person familiar with the company.
'The cost is lower in terms of fees and compliance with the United States' Sarbanes-Oxley Act, and it's just less hassle,' the source said.
The only major internet company listed in Hong Kong is Tencent, which operates the mainland's largest instant messaging service, QQ. It now trades at 53 times its expected 2007 earnings. That compares with Shanda, The9 and NetEase, which trade in New York at between 14 and 26 times earnings, although Nasdaq-listed Baidu.com, the mainland's most popular internet search engine, still rules the roost with a valuation of 114 times next year's earnings.
Beijing-based Kingsoft, founded in 1988 by chairman Kau Pak Kwan, was once regarded as the Microsoft of the mainland, dominating the market with its self-developed word processor, spreadsheet and other applications.
Rampant piracy almost scuppered the company. By 1997, pirated Microsoft software was widespread in the mainland almost overnight and Kingsoft was struggling to survive.
The company managed to revive its fortunes in the late 1990s by developing online games and anti-virus software. It has about 1,200 employees.
Kingsoft's anti-virus software became one of the 10 most popular in the Asia-Pacific region excluding Japan in 2005, according to IDC. The company, which has not yet released revenue or profit details, made US$8.4 million from anti-virus software in 2005, up 23.5 per cent from US$6.8 million in 2004, IDC said.
The company has a broad pipeline of games, and although it has yet to produce a blockbuster, many are quite successful.
Last August, the company received US$72 million in investment from venture capital groups Government of Singapore Investment Corp, Intel Capital and New Horizon Evergreen.
Kingsoft has a 2.69 per cent share of the mainland online game market, according to Beijing-based researcher Analysys.