NetEase e-learning unit Youdao sets for US IPO next week

Fundraising will fall short of USD 300m initial target amid trade tensions.

Photo by Syd Wachs on Unsplash

A unit of Chinese internet group NetEase will list its shares on the New York Stock Exchange on October 25, but its fundraising goal appears to have run into headwinds from the U.S.-China trade war.

Youdao, which develops educational technology for children, had initially planed to raise USD 300 million in the Wall Street listing. It now seeks a maximum of around USD 100 million, based on an offer price range of USD 15 to 18 per share.

The listing comes as the Chinese government aims to train engineers proficient in artificial intelligence. Youdao plans to use the IPO proceeds to further expand its education business in the AI field.

But Chinese companies seeking to list in the U.S. now face greater headwinds than in 2000, when Youdao’s parent NetEase debuted on Nasdaq.

At the end of 2018, the Securities and Exchange Commission sounded a note of caution on the reliability of financial information disclosed by U.S.-listed Chinese companies.

A bipartisan group of U.S. lawmakers proposed a bill in June calling for increased supervision of Chinese companies that trade on American markets.

This increased scrutiny is said to be one reason New York-listed Chinese e-commerce leader Alibaba Group Holding is weighing a separate listing in Hong Kong.

Youdao’s sales from January to June 2019 were RMB 540 million yuan (USD 76.3 million), with a net loss of 180 million yuan.

Parent company NetEase is China’s second-largest internet company, after Tencent Holdings. In September, the company’s e-commerce business was sold to Alibaba as part of a move to become more selective on what operations it pursues.

This article first appeared on Nikkei Asian Review. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei. 36Kr is KrASIA’s parent company.