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Chinese models at the launch of the NetEase online gaming package aimed at young women on 12 January 2004. Photo: Mark Ralston
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NetEase gets a lot of love from investors, as shares are oversold by 360 times in Hong Kong secondary listing

  • The retail tranche of NetEase’s secondary offering was 360.5 times oversubscribed, compared with the ratio of 40 times for Alibaba Group Holding’s US$13 billion IPO last year
  • NetEase said it would increase its allocation to retail investors to 20.58 million shares from 5.15 million previously, due to overwhelming demand
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Zhang Shidong
Zhang Shidongin Shanghai
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Hong Kong’s retail investors seem to love NetEase. Shares of the world’s second-largest publisher of mobile games were oversold by a massive 360.5 times ahead of the Guangzhou-based company’s HK$20.9 billion (US$2.7 billion) secondary listing in Hong Kong on June 11.

That makes NetEase one of the most successful fundraising exercises in Hong Kong since at least 2017, compared with the 40 times oversubscription in last year’s US$13 billion offering by Alibaba Group Holding – owner of South China Morning Post – and topping Xiaomi’s 9.5 times take-up rate when the smartphone maker listed in 2018.
NetEase, founded in 1997, was listed on the Nasdaq in 2000. It’s the second major US-listed technology company after Alibaba to raise funds in Hong Kong as US politicians increasingly demand to fence off Wall Street amid rising US-China tensions. Tapping Hong Kong’s capital also helps the city catch up with New York in the global stakes for initial public offerings (IPOs), providing a boost of confidence to the world’s fourth-largest stock market, as signs of a quick global recovery from the damage of the coronavirus pandemic stoke demand for risk assets from equities to commodities.

“Listings of more Chinese tech companies in Hong Kong will help attract more capitals and boost valuations there,” said Chen Hao, a strategist at KGI Securities in Shanghai. “That’ll also cement Hong Kong’s status as a financial centre in the world.”

SCMP Graphics

There are more than 200 Chinese companies listed on US stock exchanges, with US$1.2 trillion in estimated capitalisation, according to Bloomberg data. A list of 38 issuers of American Depositary Receipts (ADRs) may qualify for secondary listings in Hong Kong, according to China Renaissance.

Of these, two dozen companies valued at a combined US$300 billion that listed overseas before December 15, 2017, would be able to seek secondary listings without having to change their shareholding structure if that offering was later converted to a primary listing.

NetEase is the fourth-largest among them, capitalising at US$52.7 billion, after Alibaba, JD.com and Pinduoduo. The stock will start trading in Hong Kong with the offer price of HK$123, while its American depository receipts have advanced 34 per cent on the Nasdaq this year.

NetEase will increase the allocation to retail investors to 20.58 million shares from 5.15 million previously, due to overwhelming demand, it said in an exchange statement. The retail proportion accounts for about 12 per cent of its flotation, it said.

NetEase will use the proceeds from its Hong Kong fundraising for globalisation strategist, continued innovation and general corporate purposes.

JD.com, China’s second-largest e-commerce platform, is expected to make its debut in Hong Kong on June 18. The biggest rival of Alibaba is expected to raise as much as HK$31.4 billion selling 133 million new shares.

Hong Kong’s Hang Seng Index gained for seven consecutive days through Tuesday for the longest rising streak in 14 months.

This article appeared in the South China Morning Post print edition as: NetEase secondary offer oversold by 360 times
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