KE Holdings, the online real estate transaction platform backed by Tencent Holdings, is set to complete the biggest initial public offering (IPO) by a Chinese company in the US market in more than two years after pricing its deal above the indicative range.
The company, better known by its business platform Beike Zhaofang in China, will raise US$2.12 billion from the sale of 106 million American Depositary Shares (ADS) at US$20 each on the back of strong demand, according to a person familiar with the transaction. The company had indicated a price range of US$17 to US$19 each in its IPO prospectus.
The IPO is the biggest since Chinese online video platform iQiyi raised US$2.4 billion in March 2018, according to data compiled by Refinitiv. Trading of the ADS on New York Stock Exchange is expected to begin Thursday. Each Beike ADS represents three of the company’s class-A ordinary shares.
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There is an option to the IPO underwriters to increase the size of the IPO by an additional 15.9 million ADS to cover excess investors demand. The lead underwriters for the deal included Morgan Stanley, Goldman Sachs, China Renaissance, JPMorgan.
Chinese companies face January 2022 comply-or-delist deadline under new US audit, disclosure recommendations
Beike Zhaofang’s deal comes amid a recent pickup in momentum in US listing applications by several Chinese companies despite rising hostility in US-China ties and a backlash from accounting scandals involving the likes of Luckin Coffee and Kingold Jewelry. The US is also proposing new rules to tighten the audit oversight of US-listed companies based in China and other so-called non-cooperating jurisdictions under a January 2022 comply or delist deadline.
Such proposed rule might have fast-tracked US listing plans by Chinese companies. Chinese electric vehicle maker Xpeng has filed a listing application on the New York Stock Exchange. Lufax, part of Ping An Insurance (Group), has filed a confidential prospectus to raise up to US$3 billion.
Beike Zhaofang’s controlling shareholder is Zuo Hui, who founded Beijing Homelink Real Estate Brokerage which is also known as Beijing Lianjia, China’s largest online agency for existing homes. Last year, Beike Zhaofang facilitated over 2.2 million transactions on the platform.
Tencent Holdings owned about 12.3 per cent in Beike Zhaofang before the offering, while SoftBank held about 10.2 per cent stake, according to the preliminary prospectus. China Renaissance’s founder, chairman and chief executive Bao Fan is also one of the investors with a 3 per cent stake.
Beike Zhaofang plans to use the net proceeds for research and development and investing in platform functions and infrastructure technologies, and expanding into new geographical markets, among others.
For the six month to June 30, Beike Zhaofang reported a net profit of 1.61 billion yuan, more than doubling from 557 million yuan a year ago, according to its prospectus. It recorded a 2.18 billion yuan net loss for the full year in 2019.
China housing market is expected to grow at a compound annual growth rate of 6.6 per cent to 30.7 trillion yuan in 2024, from 22.3 trillion yuan in 2019, according to a report by independent research firm China Insights Industry Consultancy as cited by the company’s prospectus.
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More from South China Morning Post:
- Li Auto electrifies Nasdaq with US$1.1 billion IPO, the largest by a Chinese company in the US since 2018
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- China’s Tesla challenger Xpeng said to be preparing for US listing as country’s EV industry fights slowdown
- Fintech unicorn Lufax, backed by China’s biggest insurer, Ping An, said to be secretly applying for US IPO
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