(Bloomberg) – Cloud Village Inc., the music streaming arm of Chinese gaming giant NetEase Inc., has obtained approval from the Hong Kong Stock Exchange for an initial public offering, according to people familiar with the matter.
The unit plans to start assessing investor demand for its offering as early as next week, the people said, asking not to be identified because the information is private. An IPO could raise around $ 1 billion, Bloomberg News reported in May.
The approval was first reported by Yicai. A representative for NetEase declined to comment.
Cloud Village’s IPO will be the first major deal in Hong Kong since electric vehicle maker XPeng Inc. raised $ 2 billion in a dual primary listing in June. Activity has since calmed down as sentiment has been affected by China’s crackdown on overseas listings by its private companies. Markets have also been disrupted by Beijing’s plans to ban entire swathes of its burgeoning tutoring industry from making a profit.
Cloud Village operates NetEase’s music streaming platform in China and generates most of its revenue through subscriptions, virtual gifts, and advertising.
NetEase has long been far behind Tencent Holdings Ltd. in games and music streaming. Launched in 2013, the Music Wing has since expanded its products to offer everything from online karaoke to live streaming and lyrics sharing. The unit – 62% owned by NetEase – increased the number of monthly music users to 181 million last year, 9% of which are paid subscribers, according to its preliminary prospectus.
Unlike its much larger rival, Tencent Music Entertainment Group, NetEase’s music arm is still in the red largely due to high content costs – almost as large as its 2020 sales. But William Ding’s company has recently signed song licensing deals directly with Universal Music Group Inc. and Sony Music Entertainment, ending the label giants’ exclusive deals with Tencent Music.
Tencent was ordered this month by the Chinese watchdog to give up its exclusive music streaming rights and pay half a million yuan in fines, marking the most direct blow for the internet giant. . China has sought to limit the influence of its powerful tech companies, issuing a record fine of $ 2.8 billion in April on Alibaba Group Holding Ltd. for violations of antitrust laws.
Bank of America Corp., China International Capital Corp. and Credit Suisse Group AG are the sponsors of Cloud Village’s IPO, according to the prospectus.
More stories like this are available at bloomberg.com
Subscribe now to stay ahead of the game with the most trusted source of business information.
© 2021 Bloomberg LP