Kuaishou Technology launched the world’s biggest IPO since Uber 10 days ago. The shares doubled in value as soon as they hit the Hong Kong exchange, and have climbed another 30% since. That makes Kuaishou (ticker: 1024.Hong Kong) an instant top-10 emerging market stock, its $21 billion market cap edging out China Construction Bank (0939.Hong Kong), which has $3.5 trillion in assets. Woah.
“KWAI-show” may be a hard name for you to remember. It isn’t for Chinese teenagers. The company’s prospectus estimated 305 million daily viewers. (About 96 million people watched the Super Bowl.) They average 85 minutes a day glued to mini-videos and live streams, where they blow their pocket money on virtual gifts for favorite performers. And Kuaishou only lost $1 billion in nine months last year. You can see what all the fuss is about.
But Kuaishou’s spectacular launch looks increasingly like prologue to its much bigger competitor ByteDance, better known around the world by the site name TikTok. While Kuaishou’s audience is concentrated in China’s hinterland, TikTok has been a smash success globally — so much so that a certain ex-U.S. president signed an executive order banning it on national security grounds. That scuppered a public stock offering that likely would have come last year otherwise.
The war on TikTok always seemed like one of Trump’s sillier anti-China moves, coupled with his clunky attempts to broker a takeover of its U.S. business by Oracle or Walmart. Joe Biden signaling he will reconsider. The new administration asked for time-out last week on one of numerous lawsuits that have mushroomed around the TikTok ban. The government “plans to conduct an evaluation” that may “eliminate the need for this court’s review entirely,” a Justice Department filing read — legalspeak for banning TikTok was a pretty dumbass idea. (Kudos to Chinese site caixinglobal.com for digging this out.)
Two other federal courts already issued temporary injunctions against the ban late last year, so Biden’s people may be no more than bowing to legal reality. Meanwhile, TikTok has racked up an estimated 80 million regular U.S. viewers, who generated $500 million in 2020 revenue. ByteDance’s private equity valuation has climbed from $78 billion when it first started eyeing an IPO in 2018 to maybe $180 billion now, about three times Twitter’s (TWTR). (The company does own a news service called Jinri Toutiao as well as TikTok.)
No judgment here on whether the craze for homemade 15-second clips can sustain these nosebleed prices. As Western legal threats to the sites perhaps recede, the ones back home in China may be growing. That’s particularly true for Kuaishou as Beijing reportedly weighs reining in online “gift” purchases by minors, which is the backbone of its business. TikTok’s audience is older, and revenue more reliant on advertising. On the other hand, those armies of eyeballs are hard to argue with.
In any case, emerging markets investors will have some big new toys to play with. Get ready.