Huya hopes for more chicken dinner with IPO

“Winner, winner, chicken dinner” is the catchphrase in PUBG, the game that helped Huya's business last year. By raising $180 million, the Chinese live-streaming site is hoping to tuck in too.

Chinese live-streaming site Huya is set to test investor sentiment for a new equity market sub-sector after it launched an initial public offering in New York on Wednesday worth up to $180 million.

If it succeeds, Huya will become the first live-streaming site to list on a stock market anywhere in the world, setting a milestone for a sub-culture that has grown so popular among the millennials and, increasingly, Generation Z'ers too.

In some respects Huya is following in the footsteps of Chinese video sites iQiyi and Bilibili as both listed their shares in the US earlier this year. However, Huya’s focus on live-broadcasting user-generated content differentiates it from iQiyi and Bilibili, which are YouTube-like video platforms with pre-recorded content like movies and TV shows.

Huya, which was spun off from Chinese entertainment platform YY as a standalone entity in 2014, is raising public capital at a time when the explosive growth of China’s live streaming industry begins to show signs of slowing down.

But that could yet be a boon to larger players like Huya if it leads to less competition as smaller and financially unsustainable streaming sites pull out.

Also important is the company's gaming focus. Huya claims to be the biggest game live-streaming platform in China, with 86.7 million monthly active users spending an average of 99 minutes per day as of the end of last year.

Its focus on live broadcasting of video games offers it an edge against other integrated streaming sites such as Kuaishou and Inke, which are both planning to list in Hong Kong later this year. But the trade-off could be that Huya’s business performance is closely related to new game releases.

The company reduced its net loss by 85% to $15.5 million last year following the release of PlayerUnknown's Battlegrounds (PUBG), the first-person shooter that became Huya’s second-most streamed game since its launch in March.

Huya generates the bulk of its revenue from sales of virtual items, which are mainly used as gifts to video hosts and internet celebrities as a token of appreciation. It earned 99.4% and 94.7% of its income from virtual gift sales in 2016 and 2017, respectively.

In order to sustain a high level of virtual gift sales, Huya needs to invest heavily to enhance user stickiness and prevent them from switching to competing live streaming platforms like Douyu and Panda.

Over the years Huya spent heavily on signing exclusive broadcasting rights with professional eSports players and internet celebrities to retain users. Some of Huya’s exclusive broadcasters include Uzi, a two-time champion in League of Legends’ All-Stars 1v1 Tournament, and Wei Shen, a professional PUBG player poached from Douyu.


Still, Huya’s heavy reliance on virtual gift sales means its appeal could fade if the appetite of Chinese netizens for online content changes.

Chinese netizens have already shown they can change their tastes quickly.

Livestream quizzes, which allow viewers to compete for cash prizes by answering questions correctly, became a sensation in China at the beginning of the year. Just four months on, and they have almost disappeared.

China's games industry has evolved more slowly than in Europe or the US; it's rare to have new games that attract big attention. League of Legends, King of Glory, and PUBG are the few games to have become widely popular.

That implies live streaming platforms in China are less likely to earn massive user growth through regular game releases every year.

Huya's prospective IPO investors can perhaps find some comfort in Tencent’s $460 million equity investment in Huya just two months ago, underscoring the tech giant’s endorsement of the company’s prospects.

But it is worth noting also that Tencent simultaneously invested $630 million in Douyu, suggesting that it was showing support for the game live-streaming industry as a whole rather than specifically Huya’s business.

Huya is selling 15 million American Depositary Shares at $10 to $12 each. It will price the shares on May 10. Trading is scheduled to begin the next day.

Credit Suisse, Goldman Sachs, and UBS are joint bookrunners of the IPO.

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