Chinese IP-based game company CMGE raises $167.2 million in HK IPO

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(Image credit: CMGE)

Chinese mobile gaming giant CMGE Technology Group went public on the Hong Kong stock exchange on Thursday, returning to the capital markets following its delisting from Nasdaq in 2015, game media GameLook reported.

Why it matters: As competition in the Chinese mobile games market intensifies, CMGE is looking to secure more funding to expand its line of products and prolong the lifespan of its existing titles.

Details: CMGE raised HK$1.31 billion (around $167.2 million) from its initial public offering, boosting the company’s market capitalization to HK$6.53 billion as of market close on Thursday.

  • Half of the net proceeds will be used to expand and enhance CMGE’s IP-based game publishing and development, while around 40% would be allotted to merger and acquisition activities.
  • The seven cornerstone investors—including heavyweights such as short video app Kuaishou, entertainment and video-streaming platform Bilibili, and Tencent’s online literature arm China Literature—invested a total of HK$250 million in CMGE.
  • CMGE is known for holding a large number of licenses for series or individual games commonly referred to in the industry as IP, or intellectual properties. It holds licenses for more than 31 series and owns another 68 for proprietary IP as of June 30, including popular names such as Naruto and Dragon Ball Z, according to its filing.
  • The company booked RMB 1.53 billion in revenue in the six months ended June 30, marking a 127% increase compared with the same period a year prior.
  • CMGE’s net profit for the first half of 2019 was RMB 250.0 million, increasing by 53.4% year on year. During this period, the company’s average paying user conversion rate of 7.3% was significantly above the industry average, according to research firm Analysys cited in the IPO filing.
  • The company has plans to launch up to 29 new games by the end of 2020.

Context: Founded in 2011 in Shenzhen, CMGE listed on Nasdaq in 2012 but delisted in 2015 after being taken private by Pegasus Investment.

  • The company had plans to list in mainland China after its US delisting, but dropped them due to “government policy changes,” according to a media report (in Chinese) citing CEO Xiao Jian.