Bilibili Inc, which is backed by e-commerce giant Alibaba Group, tumbled as much as 6.8 percent in its Hong Kong stock debut on Monday as analysts said a regulatory crackdown in the United States on listed foreign firms hit enthusiasm for the Chinese online video site.
It was the worst start in the city in six months for a prominent stock listing. Bilibili shares sank as much as 6 percent in early trading. The company raised 20.2 billion Hong Kong dollars ($2.6bn) after pricing its shares at 808 Hong Kong dollars ($104) each last week.
Bilibili’s fall came despite a positive tone in Hong Kong’s Hang Seng Index which rose 0.4 percent by midday after opening in negative territory. The Hang Seng Tech Index fell 0.9 percent. The debut is the worst by a large company in Hong Kong since Yum China Holdings Inc shares lost 6.3 percent at the open in September after it raised $2bn, according to Refinitiv data.
In his first interview with international media, Bilibili chief executive Chen Rui told Bloomberg he is unconcerned with short-term market gyrations. The firm – which has 200 million mostly Chinese millennial or Gen Z monthly users, as well as the backing of Tencent Holdings Ltd and Alibaba Group Holding Ltd – will use most of the proceeds from the share sale to beef up its content and support its creators, in anticipation of an explosive growth in online video adoption over the next few years.
All internet users in China, numbering nearly one billion as of December will eventually adopt the format, Chen predicts. The company intends to prioritize improving its content and growing its user base over the next few years over profitability, in order to capitalize on the video mega-trend.
“We wouldn’t care too much about short-term performance in the stock market,” the 43-year-old billionaire entrepreneur told Bloomberg Television, adding that the firm had long been planning to list in Hong Kong. “Nobody will remember whether your stock went up or down on the debut in 10 years’ time.”
Back in 2009, Bilibili was born as a forum for gaming and anime fans like its creator Xu Yi, a then 20-year-old college student. But it was Chen who transformed the site from an after-school project into a promising business when the serial entrepreneur took the helm in 2014. Bilibili has since cleaned up pirated content on its platform while ploughing half a billion dollars into broadcast rights since 2018. It expanded into adjacent businesses including live-streaming, e-commerce and game publishing, its biggest cash cow.
Along the way, Chen, who previously co-founded app maker Cheetah Mobile Inc, secured investments from Tencent and Alibaba, a rare feat in China’s internet arena where up-and-comers usually align themselves with one of the twin giants. The company has partnered with Tencent and Alibaba on content production and e-commerce, respectively, and could “further deepen ties” with both parties, said Chen, who holds roughly 13 percent of the equity but about 44 percent of the vote. Sony Corp has a stake in the firm as well.
Aequitas Research Director Sumeet Singh, who publishes on the Smartkarma platform, said Bilibili’s share fall was linked to a sell-off under way in most US-listed Chinese companies as a result of the Securities and Exchange Commission’s (SEC) plans to delist foreign companies which do not meet US auditing standards. “Bilibili’s [American Depository Receipt (ADR)] appears to have been caught up in the correction leading to the ADR’s trading below the Hong Kong secondary listing price,” he said. Bilibili’s US-listed shares have fallen 8.4 percent since the SEC announced the news last week.
Bilibili sold 25 million shares in the Hong Kong offering and its filings show Alibaba bought more than a third of the stock on offer, taking its holdings to 8.2 percent of the company. There have been about $25bn worth of secondary listings in Hong Kong since the start of 2020, according to Refinitiv. UBS’s head of global banking China Mandy Zhu said the number of so-called “home-coming listings” would continue to rise in Hong Kong. The Swiss bank was a joint sponsor of the Bilibili listing in Hong Kong.
“The advantages of a secondary listing in Hong Kong include relatively manageable regulatory process and time frame, ability to attract more Mainland Chinese and Hong Kong investors as well as efficient capital raising process,” Zhu said “Given the current uncertainty of the Sino-US environment, a secondary listing in Hong Kong could also represent an extra layer of financing channel.”