Chinese video-sharing app Kuaishou filed Thursday a prospectus to the Hong Kong stock exchange, paving the way for a listing in the city.

Why it matters: The Beijing-based platform, backed by Chinese internet giant Tencent, is the second most popular short-video app in the country, trailing Bytedance’s Douyin, the domestic version of global hit Tiktok.

  • Kuaishou also faces fierce competition in the saturated short video market from new entrants and entertainment incumbents including Nasdaq-listed Bilibili. Kuaishou is known to be popular among users living in China’s lower-tier cities and rural areas.
  • China’s online entertainment industry is heavily regulated. Kuaishou said in the prospectus filed with the Hong Kong exchange on Thursday that it may “lose licenses we need to operate our business and suffer reputational harm” if it failed to comply with China’s laws and regulations regarding content moderation.

The prospectus: The preliminary prospectus to the Hong Kong bourse did not specify a timetable or size for the offering. However, it was the first disclosure of Kuaishou’s key financial details.

  • Kuaishou’s revenue for the first six months grew by nearly 48.3% year on year to RMB 25.3 billion (around $3.8 billion), according to the filing.
  • The company booked RMB 39.1 billion in revenue in 2019, and RMB 20.3 billion in 2018.
  • Kuaishou recorded positive annual adjusted net profits from 2017 to 2019. However, it booked an adjusted net loss of RMB 6.3 billion in the first half of this year.
  • “The time it will take for us to achieve profitability hinges on our ability to effectively monetize our product and service offerings and continuously grow revenues in a cost-effective way, which we may not successfully achieve,” it said.
  • Kuaishou products, including its short video apps and mini programs running on Tencent’s Wechat, amassed a total of 302 million daily active users as of June 30 with users spending over 85 minutes on average on its platforms, according to the prospectus.
  • Livestreaming is a major source of Kuaishou’s revenue. The business generated RMB 17.3 billion in revenue in the first six months of 2020, accounting for 68.5% of the company’s total revenue in the same period. The company said its live-streaming business had experienced “significant growth” in recent years, but warned that growth may slow, citing a decline in user demand.
  • Kuaishou’s revenue structure has been diversified in the past few years. Revenue generated from livestreaming accounted for more than 90% of its total revenue in 2018. In the first half, the company generated 28.3% of its total revenue from online marketing services.

Context: Reuters reported in September that Kuaishou aimed to raise up to $5 billion in the Hong Kong listing, citing people with direct knowledge of the matter. The company planned to list in January, according to the report.

  • Founded in 2011, Kuaishou has received investment from both Tencent and Baidu, two of China’s biggest tech companies. Su Hua, Kuaishou’s co-founder and chief executive officer, used to work for Google and Baidu.

Wei Sheng

Writing about semiconductors and telecommunications.