Kuaishou Technology, the world's second-largest short-video platform, plans to raise as much as US$5.4 billion (HK$41.9 billion) in what will be Hong Kong's biggest initial public offering in more than a year.

The Tencent Holdings-backed company is marketing 365 million shares to investors in a price range between HK$105 and HK$115 a share, which could raise as much as US$5.4 billion if an additional greenshoe option is not exercised, according to a term sheet seen by South China Morning Post.

If Kuaishou triggers the sale of greenshoe, or option for the underwriter to sell more stock based on strong demand, the offering would rise to US$6.2 billion, making it Hong Kong's biggest flotation since Alibaba Group Holding's US$13 billion secondary listing in November 2019, according to data from Refinitiv.

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The price range of Kuaishou's IPO rose over the weekend due to strong early demand from institutional investors, according to a person familiar with the deal, declining to be named for discussing a confidential matter. The IPO is expected to price on Friday, for the shares to begin trading on February 5.

The offering would value Kuaishou at as much as US$61.7 billion including the greenshoe, which would make it more valuable than rival Nasdaq-listed Bilibili and online streaming site iQiyi. Kuaishou's officials declined to comment.

A successful stock sale by Kuaishou would lift market sentiments and pave the way for subsequent offers in Hong Kong. Bilibili is expected to pursue a secondary offering in the city in the first quarter.

The Kuaishou IPO has 10 cornerstone investors, including the world's biggest asset manager BlackRock and Singapore's sovereign wealth funds Temasek Holdings and GIC.

Other cornerstone investors are: Capital Group, Invesco, Fidelity International, Canadian Pension Plan Investment Board, Boyu Capital, Morgan Stanley Investment Management and Abu Dhabi Investment Authority.

Combined, the cornerstone investors are expected to buy up to US$2.45 billion shares, or 45.2 per cent of the base offering at the high end of price range. International investors would account for 97.5 per cent of the offering, with 2.5 per cent set aside for retail investors in Hong Kong.

Kuaishou is the first of China's big video-sharing applications to list in Hong Kong. The company expects to use the proceeds of the offering to fund growth, expand its research and development, for potential acquisitions or investments and for general corporate purposes.

Video-streaming app Kuaishou is pictured on a mobile phone in this illustration picture taken January 25, 2018. Photo: Reuters

Kuaishou had 262.4 million daily average users in the first nine months of 2020, a 59 per cent increase over the same period in 2019, according to the company's prospectus. Its revenue rose 49 per cent to 40.7 billion yuan (US$6.3 billion) in the first nine months of 2020.

Despite the user growth, Kuaishou lost money in 2017, 2018 and 2019 and reported a loss attributable to equity holders of 97.4 billion yuan in the first nine months of 2020.

Tencent-related entities combined own a 21.6 per cent stake in the Kuaishou, according to the prospectus. Other pre-IPO backers include venture capital firms DCM and Sequoia Capital China, the prospectus said.

The joint sponsors, joint global coordinators, joint lead managers and joint bookrunners on the deal include Bank of America, Morgan Stanley and China Renaissance. Other joint book runners include: HSBC, ICBCI, Haitong, CMB International, Bank of China International and FUTU.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

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