NetEase’s Cloud Village music arm gets the nod for Hong Kong IPO, a shot in the arm for a dawdling market after a quiet July

Cloud Village, the music streaming subsidiary of NetEase, has moved a step closer to its Hong Kong initial public offering (IPO) after winning the approval from the city bourse’s listing committee late last week.

The Hangzhou-based company, with over 60 million tracks in its library, is aiming to raise up to US$1 billion, according to a person familiar with the plan, speaking anonymously for describing a confidential matter. The source added that the amount raised could still change as Cloud Village is still gauging investors’ demand.

Cloud Village would be the first sizeable IPO in Hong Kong by a Chinese internet company in more than three months, following the US$1.25 billion fundraising in April by Trip.com, the dominant operator of China’s online travel and ticketing service, according to data provided by Refinitiv. A successful fundraising would also be a shot in the arm for a dawdling stock market where 17 IPOs raised a mere US$2.7 billion in July, down 62 per cent from last year for the third-lowest month this year.

Cloud Village, which is yet to turn a profit, would face a barrage of questions from investors about its outlook and business model. The company, which claims 183 million monthly users at the end of March including the largest following among fans of Japanese pop music, or J-pop, in China, said it’s in a “relatively early stage” of turning fandom into profits, and may incur losses for three more years from 2021 through 2023, according to its draft prospectus. About 13 per cent of active users were paying customers.

NetEase, one of China’s largest internet companies and games publishers, owns 62.5 per cent of Cloud Village. Other shareholders include this newspaper’s owner Alibaba Group Holding.