Razer seeks US$550 million in Hong Kong IPO, with an eye on the world’s largest game market
The company, founded by Singapore entrepreneur Tan Min Liang, has among its cornerstone investors Hong Kong’s wealthiest man, the owners of Indonesia’s biggest cigarette maker, and a Macau casino magnate.
Razer, the equipment maker for computer gamers, backed by Intel and Hong Kong’s wealthiest man Li Ka-shing, has launched an initial public offering in the city, aiming to raise up to HK$4.3 billion (US$550 million) to fund its acquisitions and development of gaming verticals.
The company, based in Singapore and San Francisco, plans to offer 1.06 billion shares at an indicative price of between HK$2.93 and HK$4 per share, according to a prospectus. The stock is scheduled to trade for the first time on the Hong Kong stock exchange’s main board on November 13.
The stock offer puts Razer on the doorstep of the world’s largest market of smartphone users, where the revenue of computer and mobile games may grow 41 per cent to US$34.7 billion by 2021, according to the company’s presentation document.
Booming sales in China’s gaming market has already made Tencent Holdings one of Asia’s most valuable companies, where its blockbuster Honour of Kings and other titles contributed to 47 per cent of its 151.94 billion yuan (US$22.86 billion) in revenue last year. An estimated 80 million people - equivalent to the entire population of Germany - play Honour actively every day.
“We think the e-sports market has big growth potential,” said Solina Chau Hoi Shuen, founder of Li Ka-shing’s Horizon Ventures, the private equity investor with a 1.29 per cent stake in Razer. “Razer is not only the first mover in e-sports [to be listed in Hong Kong], but also a strong lifestyle brand.”
Five cornerstone investors will put in a combined US$153 million into Razer’s IPO, including the Singapore government’s investment fund GIC Private, and Shenzhen real estate developer Kingkey Enterprise Holdings, each with a US$20 million investment.
Chen Huaidan, also known as Celine Tang, the group managing director of Singapore real estate developer Singhaiyi Group, is also a keystone investor with US$50 million. Robert Budi Hartono and Michael Bambang Hartono, the two brothers at the helm of Indonesia’s Djarum Group, which makes one of every five cigarettes smoked in the country, have agreed to invest US$33 million. Macau gambling magnate Loi Keong Kuong, who owns the Rio Casino in the territory, is also an investor at US$30 million.
The public offering tranche, which contains 10 per cent of the shares offered, will hit the market between November 1 to November 6, with the offered price set on November 6.
Underwriters can issue as many as 160 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$4.9
The company, founded in 2005 by Singapore entrepreneur Tan Min Liang and his American business partner Robert Krakoff, began life as a maker of computer mice used by gamers. Since then, it’s expanded into other peripherals, and now plans to develop an entire ecosystem of components, peripherals, software and services catered to gamers, selling its products on Amazon.com, Best Buy, Target, Walmart, Tmall and JD.com.
Razer plans to use a quarter of the proceeds raised to develop new verticals in the gaming and digital entertainment industry, such as mobile devices and audiovisual technology. Another 25 per cent will be used to finance other acquisitions that will continue the expansion of the firm’s ecosystem.
The rest of proceeds will be used in research and development, marketing and sales efforts, as well as for general working capital purposes.
Razer’s 2016 revenue grew 23 per cent to US$392 million. In the first half of 2017, revenue increased 30 per cent to US$198 million.
Nonetheless, the firm suffered losses of US$20 million and US$60 million for 2015 and 2016 each. In the first half of this year, it reported a loss of US$53 million.
Investment is the company’s current priority and important strategic investments will influence operating expenses growth and overall profitability through 2018, the company said in the prospectus.