Tencent-backed Zhihu's Hong Kong IPO raises US$106 million for early investors
Zhihu, a Quora-like Chinese online content platform, priced its Hong Kong IPO at HK$32.06 per share, according to a source familiar with the transaction, raising about HK$833.6 million (US$106.3 million) for several early investors who are selling down their stakes through the deal.
The final offer price is 32 per cent lower than the initial HK$51.8 maximum price point marketed to investors. It also works out to a 4.9 per cent discount to its American depositary shares' (ADS) closing price of US$2.15 in New York on Wednesday. Each Hong Kong share represents two ADS.
Tencent-backed Zhihu's listing will allow early venture investors like Innovation Works Development Fund, which is co-managed by former Google China head Kai-fu Lee, Qiming Ventures and a unit of SAIF Partners, to cash out some of their holdings.
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While the venture funds' stake in the company will be reduced after the IPO, Tencent's 12.8 per cent stake remains unchanged.
Zhihu had 99.6 million average mobile monthly active users and 500 million monthly viewers as of the fourth quarter of 2021. Photo: AP Photo alt=Zhihu had 99.6 million average mobile monthly active users and 500 million monthly viewers as of the fourth quarter of 2021. Photo: AP Photo>
As all the 26 million shares on offer are being divested by existing shareholders, Zhihu's Hong Kong IPO does not raise any new funds for the company. There is an overallotment option to sell up to 3.9 million more shares if there is a strong demand.
The shares will start trading on the main board under the ticker "2390" on April 22. Upon its debut, Zhihu will be valued at HK$10.2 billion based on its final offer price.
Zhihu's Hong Kong dual primary listing follows a slew of US-listed Chinese companies seeking secondary listings closer to home as many of them seek to hedge against the risk of being kicked off American exchanges over audit matters.
The implementation of the Holding Foreign Companies Accountable Act has empowered the US Securities and Exchange Commission to delist foreign companies from US exchanges if they fail to turn over audit results for three straight years. The first delisting of non-compliant foreign stocks could start in late 2023.
Zhihu's listing through a dual-primary format could lead to its inclusion in the Stock Connect scheme, a mutual market access mechanism that allows mainland Chinese investors to trade Hong Kong stocks and vice versa. The scheme currently excludes stocks with secondary listings.
Launched in 2010, Zhihu had 99.6 million average mobile monthly active users and 500 million monthly viewers as of the fourth quarter of 2021. Its net loss widened to 1.3 billion yuan (US$204.7 billion) in 2021, from 517.6 million yuan in 2020.
"We expect to continue incurring net loss and net operating cash outflow in the near future as we continue to incur expenditures to build up and expand our content ecosystem," it said in the prospectus.
Credit Suisse, CICC, JPMorgan and CMB International are joint sponsors and bookrunners.
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