IPO | China’s Inke IPO debuts above low-end offer price in Hong Kong

Inke’s shares rallies on day one at the Hong Kong Exchange.

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IPO | China’s Inke IPO debuts above low-end offer price in Hong Kong

Inke, China’s major live streaming platform, officially listed on the Hong Kong Stock Exchange (HKEx) yesterday and commenced trading under the stock code of 3700. Its debut saw its stock price surge from HK$4.32($0.5), 12.21% higher than its offer price to peak at HK$5.20($0.66), declining marginally to close at HK$4.26 ($0.54).

Overall, Inke rose close to 11 percent above its offer price of HK$3.85($0.49) on its first trading day one – breaking the cold spell in the capital markets – and seeing the live streaming company raise upwards of HK$1.05b ($135 million) via the issue of 302.34 million shares – far below its original intention of raising HK$1.21 billion ($152 billion), according to details in its prospectus.

However, given the cautious capital markets with US-China trade tensions, Inke’s performance bucks the the dismal IPOs of Xiaomi and IQiyi, seeing its stock price rallying on its public float.

A relatively young company, Inke created a radical marketing strategy for cinema advertising and variety shows, surviving the developments of China’s live broadcast platform that has seen increased competition and heightened regulatory supervision.

As of 2017, the Inke app already boasts of 195 million registered users, 22.7 million monthly active users (MAU) and 1.03 million in terms of monthly average paid users. Over the past three years, it posted revenues of RMB 28.7 million, RMB 4.334 billion and RMB 3.941 billion, for 2015, 2016 and 2017 respectively.

Despite the dip in revenue growth in a difficult 2017, the company still managed to grow its net profit, seeing an increase from RMB 568 million in 2016 to RMB 791 million in 2017, highlighting the profitability of its business model.

Its live-streaming services actually allows Inke app users to purchase a virtual currency, Inke Diamonds, to gain access to virtual items and services. Hosts of the live streaming platforms, on the other hand, get to purchase interactive stickers to enhance the platform’s viewing experience. Users, too, can practise virtual gifting by buying virtual gifts for others.

All of these are what makes Inke different from traditional advertising revenue models in other social networking platforms such as Facebook, which traditionally makes money through targeted advertising.

That said, declining user numbers and revenue in 2017 following a peak in 2016 saw its user base fall to 25 million from its previous peak of 30 million in 2016.

Despite China’s live-streaming industry enjoying steady growth, reaching upwards of $3 billion in 2016 and once boasting of a year-on-year growth of 180% even, certain factors have emerged to curtail this growth, such as the consolidation in a fragmented market due to the earlier boom, coupled with regulatory clampdown and external competition from short-video platforms such as Douyin.

However, investors reportedly remain steadfast in believing that Inke can weather these challenges by expanding into new areas like other players such as Nasdaq-listed Weibo and Momo.

Editor: Shiwen Yap