IPO | Tencent-backed Douyu plans for $600m-$700m US public float

The next Chinese game live-streaming platform to head to the US for a public float.

Image Credit to Douyu.

Tencent-backed game live-streaming platform Douyu is looking to raise between $600 million to $700 million in an initial public offer (IPO) in the US, according to an account by the Chinese-language edition of the Financial Times.

The rumoured transaction follows previous media reports that the firm was planning for a public float in Hong Kong, with its last capital injection being an RMB 4 billion ($632 million) investment led by Tencent Holdings, which backed its Series B and Series C rounds in March 2016 and August 2017. Prior to this, Douyu had closed six financing rounds with an estimated valuation of $1.5 billion.

Founded in 2013, Douyu initially launched as the live-streaming division of AcFun, an anime streaming platform, which was acquired by Tencent-backed Kuaishou but was spun off in 2014 as a platform that permits users to watch players playing popular games (e.g. League of Legends and PlayerUnknown’s Battleground), in addition to a broad range of viewable content.

Its revenue model is based on users tipping influencers, advertisement, e-commerce, and games and has been profitable since early 2017, according to Chen Shaojie, Douyu’s CEO. Its revenue has increased by more than 700x over the last three years, according to Deloitte.

This growth, buoyed by the burgeoning esports market, saw the venture outperform YY and Huya in terms of daily active users (DAUs) as at March 2018, with a report by data service Jiguang indicating Douyu’s DAU hit 6.7 million, while its rivals only achieved 5.8 million and 4.74 million DAUs respectively.

Tencent, which maintains stakes in both in Huya & Doyu, is likely to reap dividends from the public float, as it positions Tencent to leverage the synergies within new growth potential in game-streaming and its own gaming unit. Douyu was reportedly the first Chinese live streaming platform to close a Series D financing round, raising RMB 1 billion ($158 million) from investors the likes of CMBI International Capital Corporation Ltd and Nanshan Capital.

The pivot to a public float in the US rather than Hong Kong could be rooted in a perception that investors have lost interest in Chinese tech stocks, following the IPO performance of XiaomiQiqi Technology. More recently, live-streaming platform Inke which had to set a lower-end price just to boost its opening-day performance,

Additionally, Douyu’s peers in the game streaming platform industry – Huya and YY – were listed in the US in deals which saw Huya selling shares at $29 apiece prior to its debut in May 2018, despite being priced at $12 per stock. Meanwhile, Huya’s shares were trading at $36, suggesting US investors possess a better understanding appreciation of game live-streaming platforms.

Editor: Shiwen Yap