TAIPEI, Taiwan--(BUSINESS WIRE)--According to analysts at Crest View International, the Xiaomi-backed cloud services business, Kingsoft Cloud, is targeting US investor demand for Chinese public offerings following the aftermath of the Luckin Coffee with a listing that could raise more than USD 500 million.
The initial public offering is the first in the US by a Chinese company since the scam controversy of Luckin Coffee erupted last month and comes when the industry struggles with the effects of the coronavirus pandemic.
"Kingsoft Cloud is selling 25 million American Depositary Shares which are valued between $16 and $18 each. This would generate potential net proceeds between $392 million and $451 million, resulting in the cloud business valuation, which is being spun-off of Hong Kong-listed Kingsoft Corp, at $3.6 billion to $3.8 billion US," reported Michael Kennedy, Head of Corporate Trading at Crest View International.
On Tuesday, the group said it was anticipating the offer, which could raise up to USD 518 million if underwriters exercised a "greenshoe" option that would require them to sell extra shares, to price on Thursday.
"Shares are expected to start trading on Friday. At a moment of heightened uncertainty for Wall Street, the Kingsoft IPO arrives as the coronavirus epidemic roils markets worldwide," added Nathan Hu, Head of Research at Crest View International.
It is the first offering in the US since March 3 when Canadian waste management firm GFL Environmental launched with a day-one decline of over 11 per cent.
This Kingsoft IPO is also the first from a Chinese company since last month's stock of Starbucks rival Luckin Coffee collapsed over 75 per cent in a single day, following an internal inquiry which discovered hundreds of millions of dollars in earnings had been fabricated.
The Luckin scandal has prompted greater regulatory scrutiny of US-listed Chinese companies. Officials at the US Securities and Exchange Commission and Public Company Accounting Oversight Board released a joint caution to investors over the book-keeping standards of Chinese companies' last month, which they said had a "substantially increased risk that disclosures will be incomplete or inaccurate."
"Kingsoft is not the first Chinese cloud service company to be listed in the United States this year, though it is the biggest. At the end of March, WiMi Hologram Cloud raised $26 million in their IPO," reported James Turner, Director of Sales & Trading at Crest View International.
Jason Elder, a partner at the Mayer Brown law firm, said the timing of Kingsoft's listing was perfect because the demand for cloud services increased dramatically with more people watching content and working from home due to the pandemic.
Kingsoft Cloud's annual revenue, which identifies itself as China's most prominent independent cloud service provider, increased more than 78 per cent from the previous year to Rmb3.9bn in 2019, according to its prospectus.
Net losses for the year also rose by 10 per cent, topping Rmb1.1bn. Current shareholders Kingsoft Group, Xiaomi and French fund manager Carmignac Gestion showed interest in acting as anchor investors, actively acquiring as much as USD 125 million worth of the offered stock.
About Crest View International
Crest View International Limited is a private wealth management company headquartered in Taipei, Taiwan. Crest View International manages over $8.7 billion (USD) on behalf of its clients from around the world.