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NetEase Expands Its Business with Hong Kong Listing


Jun. 8 2020, Published 11:53 a.m. ET

NetEase (NASDAQ:NTES) has followed Alibaba (NYSE:BABA) with a secondary listing of its stock closer to home. NetEase’s Hong Kong listing is on track to raise more than $3.0 billion. The company plans to use the listing funds to expand its business.

NetEase is an online games company. Tencent is its larger domestic rival. Notably, NetEase and Tencent both recorded double-digit revenue growth in the first quarter. They benefited from pandemic-driven demand. People played video games to pass the time during the coronavirus lockdowns that lasted several months in China.

NetEase’s revenue rose 18.3% year-over-year to $2.4 billion due to gains in the games business. Online games services’ revenue rose 14% to $1.9 billion, which contributed about 80% of NetEase’s total revenue.

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NetEase’s Hong Kong listing funds

The company’s Hong Kong listing raised $2.72 billion after it offered 171.5 million shares, Reuters reports. NetEase priced the shares at 123 Hong Kong dollars or $15.87 per share.

However, the transaction isn’t complete. NetEase expects to raise more funds. The company granted banks working on the secondary listing an opportunity to sell 25.7 million additional shares. At $15.87 per share, the additional shares could raise $410 million for the company. Therefore, NetEase’s Hong Kong listing could generate a total of $3.13 billion for the company.

JD.com (NASDAQ:JD) has also embarked on a Hong Kong listing process that seeks to raise more than $4.0 billion. JD is one of China’s top e-commerce companies. The company counts Tencent, Walmart, and Google among its corporate investors.

NetEase eyes international expansion

NetEase plans to use the funds from its Hong Kong listing to finance its international expansion. Notably, the company wrapped up the first quarter with $11.2 billion in cash. JD plans to use its Hong Kong listing windfall to develop supply-chain technologies.

JD and NetEase have joined Alibaba with Hong Kong listings. In November 2019, Alibaba completed a secondary listing of its shares in Hong Kong in a transaction that raised $13 billion. Since then, the company has announced several large investment programs. For example, Alibaba plans to invest $1.4 billion in its smart speaker division and $28 billion in its cloud business.

Finally, NetEase’s Hong Kong shares will start trading on June 11. The company’s US-listed shares will be equivalent to 25 Hong Kong shares.


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