Bilibili, which operates China’s version of YouTube, handed investors a 1 per cent loss on the first day of trading, after completing a US$2.6 billion secondary offering in Hong Kong. A slump in New York trading amid a major dumping spree and worsening US-China ties hurt sentiment.
Chairman and chief executive officer Chen Rui, who controls 43.7 per cent of voting power, cited a US law to compel foreign companies to grant access to their financial audits as “black swan” event, which triggered a record slump in US-listed Chinese stocks last week shortly after the company concluded its stock offering on March 23.
“The general situation of the stock market is relatively bad,” Chen said during an online media briefing on Monday. After Bilibili priced its IPO, “US-listed Chinese stocks have experienced the biggest drop in recent years, which should be regarded as a black swan event.”
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The Shanghai-based company chose to list in US three years ago because it thought US was “an open market,” Chen said. The firm is now reviewing the SEC document which requires accounting firms to let US regulators review the audits of overseas companies, he added.
An S&P Index of 50 US-listed Chinese stocks slumped 11.7 per cent last week, according to Bloomberg data, the steepest drop on record since its inception in June 2015. Baidu, Pinduoduo, JD.com, NIO Inc and Alibaba Group Holding (the owner of this newspaper) are the five biggest index members.
Bilibili sold 25 million shares at HK$808 each to collect HK$19.9 billion in net proceeds on March 23, joining US-listed Chinese companies like Baidu, Autohome and Yidu Tech in secondary listing in the city this year. Bilibili’s offering was priced off its American depositary shares of US$105.99 on Nasdaq.
The stock opened 2.2 per cent below its offer price and ended at HK$800. It earlier fell to as low as HK$753, a 6.8 per cent discount to its IPO price. The company’s ADS, which is worth one Hong Kong-listed share, slumped 11 per cent last week to US$97.08.
Chen reminded investors about Bilibili’s own New York debut on March 28, 2018 after pricing 42 million ADSs at US$11.50 each. The stock fell in the first two trading days, and traded below its IPO price through May 11.
“I believe the company will prove its value in the future,” the 43-year old CEO said. “Today, there is a feeling of ‘yesterday once more.’ We also broke (below IPO) when we listed on the US market. But I said at that time that no one will remember this in the next 10 years.”
Sentiment was fragile after reports over the weekend said Goldman Sachs and Morgan Stanley dumped US$20 billion worth of Chinese and US stocks tied to margin calls on New York-based Archegos Capital Management. That followed the US government’s decision to proceed with a law to compel Chinese companies to grant access to their audits, or face expulsion from Wall Street.
Like other Chinese technology stocks, Bilibili is coming to the market after a bruising few months as China’s government signaled more efforts to tighten regulations, hurting internet-platform operators and the tobacco industry. A widening rift from sanctions related to cotton produced in Xinjiang could also undermine market outlook.
Bilibili has slumped in the past six weeks in the US, erasing US$19 billion from its market value. The pressure may have been magnified by the presence of Tencent Holdings and Alibaba among its major shareholders, whose businesses have also been targeted in the clampdown.
Tencent owns 11.6 per cent of Bilibili while Alibaba (the owner of this newspaper) has interest in 8.2 per cent after the Hong Kong offering. Tencent dropped 1.3 per cent to HK$612 while Alibaba climbed 0.1 per cent to HK$216.20 in Hong Kong trading. The Hang Seng Tech Index lost 1.9 per cent.
Bilibili counted 202 million monthly active users in its full-spectrum video community last quarter, with 86 per cent of them below 35 years old, according to its prospectus. They contributed to US$1.84 billion in net revenue from gaming, advertising and other value-added services in 2020.
Hong Kong’s stock exchange has approved 22 new listings so far this quarter involving US$16.2 billion of proceeds, according to Bloomberg data. There were 37 deals in the same period a year earlier which generated US$1.9 billion.
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