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IPO

IPO

Tencent’s China Literature, mainland’s biggest online publisher, launches IPO worth up to US$1.1 billion

Hong Kong’s tech IPO market heats up as names including ZhongAn Insurance and Razer either debut or wait to go public this year

PUBLISHED : Monday, 23 October, 2017, 6:55pm
UPDATED : Tuesday, 24 October, 2017, 12:36am

Tencent unit China Literature launched its initial public offering on Monday in Hong Kong, with the aim of raising as much as HK$8.3 billion (US$1.1 billion) by offering 151.37 million shares globally at a maximum price of HK$55 each.

The amount to be raised is higher than the previously reported range of US$600 million to US$800 million.

China Literature, the mainland’s largest online publishing and e-book website, expects to debut on the main board of the Hong Kong stock exchange on November 8, according to the prospectus seen by the South China Morning Post.

The offering consists of an international placement, which mainly targets institutional investors, and an offering to the public in Hong Kong.

The public offering tranche, with contains 10 per cent of the shares offered, is expected to hit the market between Thursday and October 31. The preliminary IPO pricing date is set for October 31 as well.

China Literature plans to offer 151.37 million shares, 16.7 per cent of the enlarged total issued share capital. But underwriters can issue as many as 22.7 million additional shares under an over-allotment option, also known as the green shoe option.

That could increase the amount to be raised to as much as HK$9.58 billion.

If the public offering tranche receives an oversubscription, it will trigger a so-called clawback rule that will enable underwriters to reallocate shares to retail investors from institutional investors, and increase their tranche by up to 33 per cent of the original base offering.

China Literature said in its IPO document that 30 per cent of the net proceeds will be used to expand its “online reading” business, including growing its network of “promising [contract] writers” and expanding the genres of e-books.

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The company derives its revenue mainly from charging readers to access popular stories from famous authors who have been contracted to write.

Chinese online stories are often serialised and readers can pay by chapters as they are updated and interact with authors to develop the plot.

The rest of net proceeds will be used to fund the company’s potential investments or acquisitions, or for working capital and general corporate purposes, it said.

Tencent currently controls 65.38 per cent of China Literature. Other substantial investors include US private equity firm Carlyle Group and Trustbridge Partners, a Chinese private equity firm set up by the former Shanda Group top executive Li Shujin.

China Literature’s flotation comes as several known tech names have made or planned their IPOs on Hong Kong’s stock market.

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ZhongAn Online Property and Casualty Insurance, China’s first online-only insurer, debuted last month and has surged 37 per cent from its IPO price. The company raised US$1.5 billion in Hong Kong’s biggest IPO since Guotai Junan collected HK$16 billion (US$2.05 billion) in April.

Razer, the US gaming hardware company backed by Intel and Hong Kong tycoon Li Ka-shing, is expected to launch its IPO next month.

Daikuan.com, a Chinese car financing site with investments from Tencent, Baidu and JD.com, has also filed an IPO application to the Hong Kong stock exchange and plans to raise as much as US$800 million, according to media reports.

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