NetEase education unit Youdao looks to raise $116 million in US IPO

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Screenshot of Youdao’s official website. (Image credit: TechNode)

Gaming giant NetEase’s learning services and products unit Youdao on Tuesday updated its filing to the US Securities and Exchange Commission for its listing on the New York Stock Exchange, specifying a fundraise amount of up to $115.9 million, TechWeb reported.

Why it matters: NetEase is pushing for a larger share of the booming online education market amid competition from other major players such as Tencent-backed VIPKid and several platforms from Bytedance.

  • Online English teaching platform VIPKid just closed a Series E led by Tencent on Oct. 8. Neither company confirmed the amount, though Chinese media reported Tencent invested $150 million.

Details: Youdao will offer 5.6 million American depositary shares (ADS) with an expected IPO price range of $15 to $18. Including the greenshoe option of an additional 840,000 ADS, the company could raise up to $115.9 million, according to the filing.

  • Each ADS upon IPO is equal to one of Youdao’s Class A ordinary shares.
  • NetEase’s largest shareholder Orbis Investment Management has agreed to purchase $125 million worth Class A ordinary shares from Youdao in a concurrent private placement.
  • NetEase’s CEO Ding Lei said he is interested in purchasing up to $20 million worth of ADS at Youdao’s IPO.
  • Credit Suisse, Citigroup, Morgan Stanley, China International Capital Corp, and HSBC are the underwriters for the offering.

Context: Founded in 2006, Youdao has main two categories of products: online education platforms and learning tools.

  • The company’s education platforms include math skills app Youdao Math for high school students, a massive open online course (MOOC) app for university students, and adult education platform NetEase Cloud Classroom.
  • Youdao’s learning products include Youdao Dictionary and Youdao Translation, as well as hardware such as a translation pen and pocket translators.
  • The company’s net revenues for the first half of 2019 was $79.9 million, growing 67.7% year on year. Net losses for the period also expanded 102.9% year on year to $24.5 million.