
PE-backed ticketing player falls on debut after $287m HK IPO
Maoyan Entertainment, a Chinese online movie ticketing business backed by Tencent Holdings and several private equity investors, fell on its trading debut in Hong Kong following a HK$2.25 billion ($287.1 million) IPO.
The company sold 152.2 million shares – including an overallocation of 19.9 million shares that will be used to satisfy the overallotment option, if exercised – for HK$14.80 apiece, the bottom end of the indicative range, according to a filing. The stock closed on February 4 at HK$14.60.
It continues a dismal run for technology players listing in Hong Kong, with several offerings cut back in size and then trading below their IPO prices. Maoyan was reportedly seeking to raise as much as $1 billion and the $2.16 billion market capitalization, based on the offering price, is lower than the $3 billion valuation Tencent paid at the time of its most recent investment in 2017.
The Maoyan IPO was supported by five cornerstone investors that together contributed approximately $30 million. They include IMAX Hong Kong, Welight Capital, and Xiaomi Corporation. Welight was founded by Xiaoguang Wu, who was a senior vice president at Tencent until mid-2015.
Maoyan claims in its prospectus to be China’s largest online movie ticketing service provider, with a 61.3% market share based on gross merchandise value (GMV) for the nine months ended September 2018. More than four out of five ticket sales in China happen online and the market was worth RMB46 billion ($6.8 billion) in 2017, up from RMB3.1 billion in 2012. IResearch Consulting projects it will reach RMB110.1 billion by 2022.
The next two largest players are Alibaba Group-controlled Tao Piao Piao and Baidu Nuomi. Tao Piao Piao raised RMB1.7 billion in Series A funding in 2016. Maoyan also sells tickets for concerts, live performances, exhibitions, and sports events, where it is the second-largest operator nationally. It faces competition from the likes of Damai.cn, which raised funding from VC investors before being fully absorbed by Alibaba in 2017.
Maoyan was launched in 2012 by Meituan-Dianping and spun out in 2016, with Beijing Enlight Media buying a 67.4% stake for RMB4.3 billion. Meituan-Dianping sold a further 19.7% for RMB1.8 billion the following year. The online-to-offline services platform still owns 7.34% of Maoyan and uses the company as its exclusive movie ticketing channel. The Meituan and Dianping apps accounted for 80% of Maoyan’s RMB21.7 billion in movie ticket GMV in 2017.
The contribution from Tencent’s WeChat and QQ platforms is smaller, but the strategic relationship only started in 2017 when Maoyan merged with Maoyan merged with Tencent-backed Weiying Times Technology in a deal that valued the combined business at approximately $2 billion. Weiying previously raised several rounds of funding, with CMC Holdings – a unit of CMC Capital Partners that is intended to hold assets beyond a 10-year horizon – among the participants.
Enlight has a 17.3% stake in Maoyan, while a further 24.85% was pledged by Enlight in return for bank loans. Tencent’s direct ownership is 14.05%, CMC has 2.6%, and Chinese entertainment company Huayi Brothers International has 0.43%.
The company generated RMB2.55 billion in revenue for 2017, up from RMB1.38 billion the previous year. Most of it comes from service fees of 4-8% on each move ticket sold through the platform. Efforts have been made to diversify the business by providing entertainment content services – such as distribution, promotion and production of movies and TV series – in-venue food, beverage and merchandising services, and advertising services.
Maoyan remains unprofitable, with its net loss narrowing to RMB76.1 million in 2017 from RMB508.2 million in 2016. There are substantial operating costs in the form of fees paid to ticketing systems players that connect the online platform to the cinema as well as content distribution and promotion payments.
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