Tencent subsidiary backs Cheetah Mobile IPO

PUBLISHED : Thursday, 08 May, 2014, 1:15am
UPDATED : Thursday, 08 May, 2014, 1:15am

While the initial public offering of e-commerce giant Alibaba is drawing much attention from investors, mainland security software company Cheetah Mobile has quietly added a subsidiary of Tencent as a major subscriber to its own offering in New York today.

In its regulatory filing in Hong Kong, Cheetah parent Kingsoft confirmed that TCH Copper subscribed on Monday for up to US$20 million of the 12 million new American depositary shares its spin-off will list on the New York Stock Exchange.

Tencent, Asia's largest listed internet company, owns about 18 per cent of Cheetah's issued share capital.

Cheetah, formerly known as Kingsoft Internet Software, plans to raise US$200 million from its offering, which is down from the original US$300 million that was filed early last month.

Guotai Junan International analyst Ricky Lai said yesterday that Cheetah had generated interest from specific investors because "it provides popular security and productivity applications used by many mobile users" on the mainland, as well as a platform that supported large marketing business partners.

"Since its offering is much smaller than Alibaba's IPO, Cheetah is likely to succeed in raising the amount it has targeted," Lai said.

In separate agreements last month, Chinese online search market leader Baidu, smartphone brand Xiaomi and Kingsoft subscribed to a combined US$50 million in the Cheetah offering.

Cheetah estimated that net proceeds from its float will amount to US$147.4 million, or US$170 million if the underwriters exercise their option to buy additional shares. Pricing is expected to be between US$12.50 and US$14.50 per share.

The company plans to use US$50 million of the proceeds to expand into selected international markets; US$35 million to build up its sales and marketing; US$35 million to invest in technology, infrastructure, and research and development; and the balance for general corporate purposes.

Anticipation for the Cheetah spin-off, however, has not translated to a boost in Kingsoft shares, which fell 7.55 per cent to close at HK$23.25 yesterday.

In its regulatory filing in the United States, Cheetah said its core applications had been installed on 502.1 million mobile devices as of March 31. Its apps included Clean Master, CM Security and Battery Doctor.

Sales are generated from more than 380 online marketing partners, the biggest of which are Tencent, Alibaba and Baidu.

Cheetah, which was founded in 2009, posted a net profit of 62 million yuan (HK$77 million) last year on revenue of 750 million yuan.