A Chinese music group withdrew a billion dollars for an IPO in Hong Kong after a technological fight


IPO updates

China’s second-largest music streaming service has canceled an initial public offering of $ 1 billion in Hong Kong as concerns over growing regulatory measures against the country’s technology groups have hit investor confidence.

Cloud Village, the music streaming business of technology group NetEase, will not continue with the IPO that was supposed to be launched this week due to a disappointing response from investors, claim three people familiar with the matter. The company intended to wait for better market conditions in order to potentially restart its market listing plans, said one of the people.

The IPO would be one of the largest stock sales in Hong Kong this year and the first major Chinese technology company since Beijing launched suppression of foreign lists last month.

Strict new rules of Chinese regulators, published after Didi Chuxing’s American IPO in June, sparked a sharp sell-off by Chinese technology and Internet groups. All planned US IPOs of companies from mainland China have been put on hold.

Wall Street bankers have begun redirect billions of dollars planned lists from New York to Hong Kong after the effective freezing of U.S. lists of Chinese technology groups.

However, a lack of investor appetite in the Cloud Village IPO could signal that deepening tensions between Washington and Beijing may not lead to big surprises for Hong Kong, which has long sought to lure Chinese technology companies away from the Nasdaq and New York Stock Exchanges.

According to data from Dealogic, Chinese technology companies planned to raise at least $ 9 billion by joining Hong Kong this year.

“We now have one IPO withdrawal, and I don’t think that’s the end,” said Dickie Wong, head of research at Kingston Securities brokerage. Wong said he expects more Chinese technology groups to delay or cancel their entry plans in the coming months.

“It is no longer an easy task to list Chinese technology companies, whether it is Hong Kong [or elsewhere], due to regulatory risk, ”he added.

A fund manager in Hong Kong said the deal with Cloud Village seems to have “fought” last week. The bankers “asked for what price we would take instead of asking for an allocation,” the fund manager said.

One banker close to the deal said some of Cloud Village’s major investors would not agree to have their shares locked – which would prevent them from selling a few months after the IPO.

Talks with investors took place at the same time as the shares of the short video application Kuaishou, which is on the Hong Kong list it fell by a record 15 percent last week, after the lockout expired after the IPO, allowing those who supported the cornerstone to sell out.

The last-minute turnaround for Cloud Village comes despite antitrust regulators dealing a huge blow to rival Tencent last month that bankers expected to strengthen previous value. On June 24, China’s State Market Regulation Authority ordered Tencent Music to waive its exclusive rights to music houses within 30 days.

However, NetEase caught a wave of sales of Chinese technology stocks last week, as Beijing announced curb online games. Shares in NetEase, China’s second-largest gaming group after Tencent, have fallen about 11 percent since the news was released last Tuesday.

A person familiar with Cloud Village’s IPO plans said the company was “closely monitoring market conditions and looking for an optimal launch window.” NetEase did not immediately respond to a request for comment.

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