Cloud Village makes poor business debut in Hong Kong

By Clarence Leong

Music streaming company Cloud Village Inc. made a lackluster debut in the Hong Kong market on Thursday amid a difficult environment for Chinese tech stocks.

Shares of NetEase Inc., which raised HK $ 3.28 billion ($ 420.9 million) in its initial public offering, were HK $ 200.20 in the afternoon, or 2.3% less than the IPO price.

The valuation of the company seems dear to Essence International. He notes that Cloud Village’s price-to-sales ratio – the value investors place on a company for its revenue – is much higher than that of Tencent Music Entertainment Group, the industry leader in China. Based on 2020 revenue, the price of Cloud Village’s offer places its valuation at more than 6 times, compared to 2.6 times for Tencent Music.

Due to their high valuation and moderate sentiment towards tech stocks, Cloud Village stocks are unlikely to outperform in the near term, Essence said.

The muted debut comes as a host of Chinese companies rush to strike deals in Hong Kong, with at least seven companies in sectors ranging from real estate to healthcare this week, generating nearly $ 14 billion. HK dollars of combined revenue.

They are doing so at a time when investor sentiment has been shaken by the emergence of the Omicron Covid-19 variant, and as a slowdown in China’s economic growth is weighing on the near-term outlook for tech companies. The benchmark Hang Seng index hit its lowest level in 14 months this week, and the Hang Seng TECH index has lost 29% so far this year.

Cloud Village, based in Hangzhou and founded in 2013, counts NetEase, Sony Music Entertainment and Orbis Investments among its main investors. It says 185 million users logged into its NetEase Cloud Music online music platform at least once a month during the first half of 2021, and 26 million users paid for its services each month. .

The company filed for an IPO in Hong Kong in late May, but pulled out in August following a massive sell-off in Chinese IT stocks as Beijing intensified regulatory action against the industry. Cloud Village filed a new filing in November, but cut the size of its IPO by more than half.

Write to Clarence Leong at [email protected]

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