Feiyu Technology International, the Chinese mobile game developer, priced its Hong Kong initial public offering at the mid-point on Monday after an accelerated bookbuild.
The company sold 300 million shares at HK$2.20 per unit, the middle of the initial HK$1.85 to HK$2.55 per share range, raising $85 million in the process. The book was two times oversubscribed, with the majority of investors being mainland institutions, according to bankers close to the deal.
“The stock went to a pretty good mix of Chinese corporates and institutions, as well as international institutions, [although] the book was definitely more skewed towards Chinese funds,” said one banker close to the deal.
Feiyu has strong ties with mainland internet companies — it distributes games across Tencent’s platform, and Weibo, China’s version of Twitter, came in as a cornerstone investor, purchasing $15 million of the company’s stock.
“Naturally those names attract quite a few Chinese institutions,” the banker said on why the book was so heavily skewed towards mainland investors.
Although it was a small deal with only 20 lines in the book, bankers said there was enough demand across the price range, which put the issuer in the drivers’ seat when it came to selecting the price. “It was oversubscribed across the price range but management wanted to price at the midpoint to leave something on the table,” the banker told FinanceAsia.
At HK$2.20 per unit, Feiyu is trading at 9.7 times its 2015 earnings, compared to the 8.2 to 11.2 times its 2015 earnings it was initially marketed at. The company has a market capitalisation of $400 million.
Hong Kong vs New York
Feiyu becomes the latest technology company seeking to float its shares after Alibaba’s $25 billion IPO in September. While many anticipate a spate of mainland technology and e-commerce companies will follow Alibaba’s footsteps and list in the US, Feiyu may represent a small number of companies choosing to float shares in Hong Kong.
Geographically and culturally, Hong Kong is the preferred location to New York for Chinese companies, and Alibaba made it clear last year Hong Kong was the favoured location for its IPO. But strict restrictions on ownership structure sent Jack Ma and his executives to New York, where dual-class share structures are the norm.
Online retailer JD.com raised $1.8 billion in a US listing in May, which was at the time the largest US stock market listing by a Chinese company and seen as a barometer for Alibaba’s pending flotation.
The one exception is Tencent, which raised $200 million in Hong Kong in 2004.
Xiaomi, the third largest smartphone supplier after Apple and Samsung, is aiming for an IPO as early as next year. The company has said it plans to spend $1 billion to expand its own television content.
While it has yet to decide on a location for its IPO, many anticipate it will choose Hong Kong, as local investors tend to be more familiar with hardware firms than software firms.