Maoyan IPO catches Tencent-Alibaba rivalry on film

With its online ticketing business Maoyan Entertainment looking to raise $345 million from its IPO, Tencent is set to go head-to-head against Alibaba on the Hong Kong stock exchange.

Maoyan Entertainment is a key player in one of several proxy rivalries between Tencent and Alibaba but potentially the first to take place in the public market, now that the retail bookbuild for its HK$2.7 billion ($345 million) initial public offering is scheduled to kick off on Wednesday.

The Tencent-backed online movie ticketing service is looking to sell 132.4 million new shares at HK$14.8 to HK$20.4 each through its Hong Kong IPO, according to preliminary terms released by the company.

Tencent is Maoyan’s second-largest shareholder with a 16.3% direct stake, and is also a key shareholder in Meituan-Dianping, Maoyan’s third-largest shareholder with a 8.6% interest.

If Maoyan successfully lists its shares next month, it will become the latest Tencent subsidiary to float on the stock market in recent years following the likes of China Literature, Yixin Group, Meituan-Dianping and Tencent Music Entertainment.

But what makes Maoyan special is that it will vie directly with Hong Kong-listed Alibaba Picture, which owns online ticketing app Taopiaopiao, for the attention of public market investors. It will be the first pair of Alibaba and Tencent subsidiaries competing in the same stock market.

Maoyan and Taopiaopiao are China’s mainstream ticket ordering services with a market share of 61.3% and 34.3% respectively.

To be sure, the two Chinese technology giants are also listed at the group level. However, some analysts do not see them as fully comparable from the perspective of many investors given Alibaba is listed in New York and Tencent trades in Hong Kong.

In most other respects it is clear the two tech titans are in fierce competition across multiple industries, from third-party payment and video streaming to food ordering and bike-sharing. But their subsidiaries are yet to clash at the stock-market level largely because Alibaba keeps most of its businesses under the group and has yet to spin them off as independent entities.

For instance, Alibaba’s food-delivery services Ele.me and Koubei remain private entities while their main rival, Tencent’s Meituan-Dianping, went public last year. And while Tencent’s payment system forms part of the listed group, Alibaba’s Ant Financial is expected to remain private at least until next year.

MOVIE BATTLE

Maoyan Entertainment, which was spun off from Meituan-Dianping, is the largest service provider in China’s rapidly-growing online ticketing industry. Chinese film lovers are increasingly buying their tickets online on the back of the country’s high penetration rate for mobile usage and online payments.

China’s penetration rate for online cinema-ticket ordering rose drastically from 18.4% in 2012 to 85.5% as of September last year.

The dramatic growth already seen arguably suggests there is limited room for further expansion given online ticket ordering has become the norm for Chinese movie goers. Also negative is the absence as yet of a sustainable business model for online film-ticketing services – Maoyan, for example, made a loss in three of the last four years.

Maoyan increased its market share to 61.3% last year from 47.1% in 2017 after acquiring Weying, China’s third-largest online ticketing service at the time. However, Alibaba’s Taopiaopiao is looking to fight back and last November said it would spend over Rmb1 billion ($157 million) on discounts and promotions.

Maoyan is set to conduct its Hong Kong public offering between January 23 and January 28. Listing is slated for February 4.

Bank of America Merrill Lynch and Morgan Stanley are joint bookrunners of the IPO. CICC, UBS and CSC International are joint bookrunners. China Renaissance is the sole financial advisor.

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