Chinese streaming platform trades flat after $775m US IPO

The company sold 44.9 million American Depository Shares (ADS) for $11.50 apiece, which represented the bottom end of the indicative range. Douyou filed its listing application in April but then delayed the offering due to market volatility arising from China-US trade tensions. The stock saw little movement on debut, ending the day at the IPO price.

Tencent Holdings, which has a strategic relationship with Douyou, remains the largest shareholder with a 37.2% stake, while Sequoia Capital has 9.1%, according to a prospectus. Sequoia invested RMB107 million ($15.6 million) in Douyu in 2014, a year after the business was founded. The VC firm then made a RMB50 million loan to Douyu the following year, which converted into equity in a Series B round in early 2016. That round saw Tencent, Sequoia and other investors commit RMB481.5 million.

A further RMB1.5 billion was raised through Series C and D rounds in 2016 and 2017, respectively. Tencent took part in the Series C and then contributed $630.7 million more in March 2018. Two months later, Sequoia – now operating through its global growth fund – invested $197.4 million. The 2018 investments were preceded by an offshore restructuring intended to facilitate a US listing.

Douyu claims to be China’s leading game-centric streaming platform with 253.6 million registered users at the end of last year. It had an average of 153.5 million monthly active users (MAUs) during the fourth quarter of 2018, rising to 280.9 million in the first three months of this year. During the latter period, the average time spent on the platform each day was 56 minutes per user.

The company attracts viewers through a stable of 6.5 million registered streamers, including 6,500 top performers who are signed to exclusive contracts. A total of 30.2 million hours of content was generated during the first quarter, with approximately 780 streamers attracting more than one million viewers. Douyu has also pushed into e-sports content and now organizes its own competitions. It had 125.3 million average monthly e-sports MAUs in the fourth quarter.

Revenue increased from RMB1.89 billion in 2017 to RMB3.65 billion in 2018, with 86.1% of that coming from live streaming and the rest from advertising. Live streaming revenue is primarily derived from virtual gifts that users give to one another. Over the same period, Douyu’s net loss increased from RMB612.9 million to RMB876.3 million. Content costs, revenue sharing, and bandwidth expenditure are the main drags on the bottom line.

China is the world’s largest games market by revenue and number of gamers – although this is a source of concern of the government, which has imposed an industry crackdown in the past year, including a freeze on approvals for new games, in an attempt to curb addiction. The country also ranks first for game-centric live streaming, whereby viewers go to platforms to watch game-play and e-sports competitions and also chat online to other viewers.

Last year, Huya, a game broadcasting business that spun out from social networking platform YY, raised $180 million through a US IPO. There have been six offerings by PE-backed Chinese companies on US exchanges in 2019, compared to 22 in all of 2018, AVCJ Research's records show. Douyu supplanted Luckin Coffee as the largest of 2019 to date.

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• Topics
• Greater China
• IPO
• Technology
• China
• TMT
• Tencent
• Sequoia Capital