Kingsoft Cloud, the Xiaomi-backed cloud services company, is testing US investor appetite for Chinese public offerings on the heels of the Luckin Coffee scandal with a listing that could raise more than $500m.

The initial public offering is the first by a Chinese company in the US since Luckin Coffee’s fraud debacle emerged last month, and comes as the market grapples with the impact of the coronavirus pandemic.

Kingsoft Cloud is offering 25m American Depositary Shares priced between $16 and $18 each. That would deliver estimated net proceeds of between $392m and $451m, valuing the cloud business, which is being spun off of Hong Kong-listed Kingsoft Corp, at $3.6bn to $3.8bn.

The company said on Tuesday that it expects the offer — which could raise up to $518m if underwriters exercise a “greenshoe” option that allows them to sell additional shares — to price on Thursday. Shares will begin trading on Friday.

Kingsoft’s IPO comes at a time of heightened volatility for Wall Street as the coronavirus outbreak roils markets across the globe.

It marks the biggest offering in the US since March 3, when Canadian waste management company GFL Environmental debuted with a day-one drop of more than 11 per cent.

It is also the first from a Chinese group since shares in Starbucks challenger Luckin Coffee plummeted more than 75 per cent in a single day last month, after an internal investigation found hundreds of millions of dollars in sales had been fabricated.

The Luckin scandal has prompted greater regulatory scrutiny of US-listed Chinese companies.

Last month, officials at the US Securities and Exchange Commission and Public Company Accounting Oversight Board issued a joint warning to investors over Chinese companies’ book-keeping standards, which they said carried a “substantially greater risk that disclosures will be incomplete or misleading”.

Kingsoft is not the first Chinese cloud services provider to list in the US this year, although it is the biggest. WiMi Hologram Cloud raised $26m in an IPO in late March. Its stock has dropped more than 15 per cent since its debut on April 1, the day before Luckin’s plunge. The benchmark S&P 500 index is up almost 9 per cent over the same period.

Jason Elder, a partner at law firm Mayer Brown, said the timing of Kingsoft’s listing was good as demand for cloud services has grown substantially with more people streaming content and working from home due to the pandemic. “The cloud business is very appealing in today’s market,” he said. “It makes sense that they would take this opportunity.”

Annual revenue at Kingsoft Cloud, which describes itself as China’s largest independent cloud service provider, rose more than 78 per cent from the previous year to Rmb3.9bn in 2019, according to its prospectus. Net losses also increased 10 per cent for the year, topping Rmb1.1bn.

Existing shareholders Kingsoft Group, Xiaomi and French fund manager Carmignac Gestion have expressed interest in serving as anchor investors, collectively purchasing a total of as much as $125m worth of the stock offered.

Xiaomi founder Lei Jun is chairman of Kingsoft Group.

JPMorgan, UBS, Credit Suisse and CICC are joint lead underwriters for IPO.

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