In China, tipping your favourite livestreaming host has become as common as tipping a waiter. Cash spent on virtual gifts on video platforms such as TikTok has surged during the pandemic. China’s second-biggest short video app Kuaishou is riding that wave. It is on track to be the largest tech listing since Uber. Longer term, online tipping exposes Kuaishou to official disapproval.
The company is set to raise up to $6.3bn in Hong Kong, valuing the company at up to $62bn at the top of the range. Pent-up investor demand should ensure shares are heavily bid. Hong Kong dollar liquidity hit a record late last year. This reflected the postponement of Ant Group’s listing coupled with the absence of ByteDance, TikTok’s parent company, from the public markets.
Kuaishou is smaller than Douyin, the Chinese version of TikTok, with about half the users. But it has some distinct advantages. The group’s smaller size has limited the scrutiny of US regulators. It is also less dependent on ad sales. The bulk of revenue is a cut of virtual gifts viewers buy for livestreaming hosts. Commission runs as high as half the price for gifts costing up to $300.
More negatively, this leaves Kuaishou vulnerable to Beijing’s tightening control on the tech sector. Curbs include banning teenagers from making virtual gifts on streaming platforms and limits on the total spending by any single user. Signing up and holding on to new users — which rose nearly 50 per cent in the first half last year — will be increasingly expensive for Kuaishou and Douyin as competition grows among smaller rivals.
Kuaishou is expected to start trading amid retail frenzy. Investors uncomfortable with participating in this directly can gain limited, lower-risk exposure via Tencent. The local gaming giant holds around a 22 per cent stake in the company and should be in no hurry to sell having invested just about a year ago. Tencent’s Hong Kong-listed shares rose 11 per cent on Monday. Expect more upside when Kuaishou joins the market next week.
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