Gaming group NetEase will sell up to $3bn of shares in a Hong Kong secondary offering, in what could mark the start of a wave of Chinese companies raising capital in the city as tensions between Beijing and Washington simmer.
People familiar with the matter said that NetEase, one of China’s biggest makers of online video games, would begin placing shares with institutional investors from Monday ahead of publicly listing its stock on Hong Kong’s bourse. The sale is expected to raise between $2bn and $3bn.
NetEase shares currently trade on New York’s Nasdaq but Chinese companies increasingly fear that they could fall victim to growing US-China hostilities. President Donald Trump on Friday announced a probe into Chinese groups listed in the US and last month ordered the main federal government pension fund not to invest in such companies.
NetEase, which has traded in New York for two decades, raised the prospect of it being delisted from the Nasdaq in a filing to the Hong Kong stock exchange last week, citing tougher US regulations regarding Chinese companies.
The move by NetEase is in line with similar decisions by other Chinese companies currently listed in the US, such as ecommerce business JD.com, which is also looking to raise up to $3bn through a secondary listing in Hong Kong.
Baidu, the company behind China’s leading search engine, is also considering selling shares in the city. Alibaba raised $13bn in a secondary offering in Hong Kong last year that also came during a time of intense US-China frictions.
“More and more Chinese companies are considering Hong Kong to diversify risk . . . you don’t want to put all your eggs in one basket considering the current situation,” said Shawn Yang, managing director at Blue Lotus Capital Advisors.
Such a share sale by NetEase, which would be the city’s largest of the year so far, could also provide a much-needed shot in the arm for Hong Kong’s credentials as a regional financial hub. The city, which has been shaken by anti-government protests for much of the last 12 months, is set to be stripped of the special trade privileges it enjoys with the US after Beijing moved to impose a national security law on the former British colony.
NetEase, which gets four-fifths of its revenue from video games, has been boosted in recent months by lockdowns imposed due to the outbreak of Covid-19 in China. That trapped millions of its users at home with few alternatives for entertainment, helping to lift first quarter revenue by 18 per cent year on year.
The company would be “bringing our established brand back to China”, William Ding, NetEase chief executive, told shareholders last week. “Returning to a market that is closer to our roots will further fuel our passion in our business and our users.”
JPMorgan, Credit Suisse and CICC are joint sponsors of the NetEase Hong Kong listing. All four companies declined to comment on the matter.
Additional reporting by Ryan McMorrow in Beijing