China’s Kingsoft Cloud sets terms for US listing in first major IPO since COVID-19

China’s Kingsoft Cloud Holdings Ltd said on Monday it aims to sell up to $450 million in stock in a U.S. initial public offering (IPO), which could value the cloud service provider at as much as $3.6 billion.

Kingsoft will be the first major U.S. IPO by a company that is neither a biotechnology firm nor special purpose acquisition company (SPAC) since the coronavirus outbreak roiled global stocks in March. Biotech and SPAC IPOs are typically immune to broader market swings.

Kingsoft offers cloud infrastructure as well as enterprise cloud and artificial intelligence of things services. Cloud computing has so far been one of the sectors boosted by the novel coronavirus outbreak as it drives more businesses to operate digitally and rely on cloud computing.

Kingsoft is looking to sell 25 million American depositary shares (ADS) between $16 and $18 per ADS, the company said. It expects to price its IPO on Thursday and start trading on the Nasdaq stock exchange on Friday under the symbol “KC.”

Existing shareholders Kingsoft Group and Xiaomi, as well as Carmignac Gestion, have shown an interest in anchoring the IPO, buying up to $25 million, $50 million and $50 million of the stock offered, respectively.

The IPO is also the first gauge of U.S. investor demand for Chinese companies going public in New York after a fraud scandal sent shares in Chinese coffee chain Luckin Coffee into freefall last month.

Luckin, whose stock is down almost 90% in 2020, had one of the most successful U.S. IPOs by a Chinese company last year, attracting interest from the likes of BlackRock Inc and hedge fund Citron Capital.

“There is no doubt that the Luckin debacle has put a cloud over the Chinese IPOs in the pipeline, but the interest for Chinese companies to list here in the U.S. remains strong,” said Jason Ye, Asia practice chair of law firm Ortoli Rosenstadt LLP, which advises Chinese companies on their IPOs.

Following Luckin’s fallout, the U.S. Securities and Exchange Commission and the Public Company Accounting Oversight Board (PCAOB) issued a joint statement warning investors against Chinese companies with regard to risks including financial reporting.

Since the Luckin scandal, SEC and PCAOB issued a joint statement requiring Chinese companies must disclose prominently as a risk factor if their auditors are not inspected by the PCAOB, which oversees the audits of public companies in the United States.

Kingsoft has become the first Chinese company to disclose such risks following the statement, said Melanie Chen, head of China Group at UHY LLP, a New-York based accounting firm.

Kingsoft estimated revenue for the first three months of 2020 were between 1.35 billion yuan ($191.2 million) to 1.4 billion yuan ($198.3 million), an increase in the range of 59.6% to 65.5% year on year. The company incurred a net loss in 2019 of 1.1 billion yuan, compared to a net loss of 1 billion yuan in 2018.

JPMorgan, UBS, Credit Suisse and CICC are the banks underwriting the IPO.

Reuters

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.