China short video platform Kuaishou files for Hong Kong IPO

The company is perhaps best known as the key domestic rival to Douyin, ByteDance’s short video business. ByteDance is currently embroiled in regulatory difficulties in the US regarding TikTok – the international equivalent of Douyin, having been threatened with closure. Bloomberg reported last week that ByteDance is looking to raise $2 billion in funding ahead of its own Hong Kong IPO.

Kuaishou was established in 2011 as a tool for creating and sharing GIFs. A short video social platform followed in 2013 and a livestreaming extension came three years later.

For the six months ended June, the company had an average 302 million daily active users (DAUs) and 776 million monthly active users (MAUs). DAUs accessed the app 10 times a day, spending an average 85 minutes in total. Content creators account for approximately one-quarter of MAUs and they were responsible for more than 1.1 billion average monthly video uploads.

Revenue is generated through the sale of virtual items – Kuaishou has its own currency, KwaiCoins, that can be exchanged for gifts that users send to other content creators as means of acknowledgment – and online marketing services. In 2018, the company started facilitating e-commerce transactions. It is developing other monetization opportunities, including online gaming.

According to iResearch Consulting, gifting revenues on livestream video platforms in China reached RMB140 billion in 2019 and will hit RMB416.6 billion in 2025. Over the same period, mobile advertising channeled through these platforms is expected to rise from RMB81.4 billion to RMB465.3 billion.

Kuaishou has raised more than $4.8 billion across six rounds of funding, the most recent of which closed in February at $3 billion. It featured Tencent, Boyu, Temasek Holdings, and the state-owned China Internet Investment Fund, among others. Morningside Ventures – now known as 5Y Capital – was the earliest investor, providing Kuaishou’s Series A in 2014. It re-upped in the Series B, which saw the arrival of DCM Ventures and Tencent, with DST and Sequoia joining in the Series C.

Tencent is the largest external shareholder with 21.6%, followed by Morningside on 16.5%, DCM on 9.2%, and DST on 6.4%, the prospectus shows. Other investors include Baidu, Shunwei Capital, and CMC Group.

Kuaishou reported RMB39.1 billion in revenue for 2019, up from RMB20.3 billion a year earlier. For the first six months of 2020, revenue was RMB25.3 billion. The live streaming contribution – chiefly gifting – has fallen from more than 90% to 68.5% during this period as the online marketing services business has grown.

Nevertheless, the company’s net losses continue to mount: from RMB12.4 billion to RMB19.6 billion to RMB68 billion. Kuaishou shares a portion of its virtual gifting revenue with content creators, but the biggest outlay is sales and marketing. A total of RMB13.3 billion was spent in the first six months of 2020, compared to RMB9.4 billion in 2019 as a whole. The company said it expects the consequent increase in user numbers and engagement to create more scope for monetization.

The size and pricing of the offering have yet to be determined.

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• Topics
• Greater China
• Media
• Technology
• IPO
• China
• TMT
• Tencent
• Boyu Capital
• Sequoia Capital
• 5Y capital
• DCM-Doll Capital Management
• DST Advisors