China’s answer to the video sharing social media platform YouTub, which is banned in the country – Bilibili, has slumped on its debut at the stock market soon after they were launched on the Hong Kong stock exchange.
The share price of the company opened at HKD$790 ($101.6), which is 2.2 per cent below their issue price and later dropped by another 4 per cent.
The Chinese firm hopes to be able to generate more revenues through subscriptions just like Netflix.
This public listing is one of the latest to be done at a Chinese stock exchange by Chinese tech companies in what is being referred to as “homecomings” for Chinese firms that were listed in exchanges in the United States.
An increased scrutiny from market regulators in the United States which were initiated by the former US president Donald Trump and his administration has prompted the Chinese companies to seek out and launch secondary listings in Hong Kong.
According to analysts, the Chinese companies weary of US regulators want to have an insurance in the eventuality of them being kicked out of US exchanges. The process of delisting from US exchanges has already been initiated for three Chinese telecommunications companies.
Chinese state-backed telcos China Telecom, China Unicom and China Mobile were suspended from the New York Stock Exchange in January this year.
There has not always been the same level of enthusiasm of investors to the “Homecoming” listings compared to those from some other listings by tech companies of China.
Last week, when the shares of the internet search giant Baidu got publicly listed at the stock exchange in Hong Kong, there was but a small increment in price upon debut. And last year, a lacklustre secondary launch was also experienced by Chinese ecommerce giant JD.com.
At a share value of $104 each at its launch, Bilibili was able to raise only $2.6bn last week which was lower than the $3bn target that the company had set of generating from the public listing.
According to Refinitiv data, since the public listing of Yum China Holdings whose shares dropped by 6.3 per cent in debut in September last year, the debut performance Hong Kong of Bilibili is the weakest amongst the major share market offering at the exchange.
Even though prospectus of Bilibili says that its revenues have almost tripled since 2018, the company is still a loss making one. In the last quarter of 2020, the video sharing platform had 202 million monthly average users, according to its prospectus, which was 55 per cent higher than in the same period a year ago.
Compared to the number of monthly average users of rival video platform Kuaishou, that number of Bilibili was quite lower. Last month, the public listing of Kuaishou saw its stocks surging almost 190 per cent at its share market launch.
Bilibili also faces increasingly stiff competition from a range of other home-grown Chinese video platforms. But the company plans to follow the subscription model of business of Netflix which it hopes will help it to become profitable by by offering premium content to subscribers.
(Adapted from BBC.com)