Chinese video game livestreaming platform DouYu International is ready to revive its delayed US initial public offering on NASDAQ. The Tencent-backed company seeks to raise up to $944m despite growing apprehension around Chinese tech companies amid US and Chinese trade tensions.
Similar to the Amazon-owned Twitch, the platform streams esports tournaments and other video game-related content created by broadcasters. According to Monday’s filing with the US Securities and Exchange Commission, DouYu will offer 44.9m new American depositary shares, which are priced between $11.50 and $14 each. Additionally, current investors will offer 22.5m in existing stock for the sale. The filing shows that the company plans to use 35% of the proceeds to expand it content, which includes esports. About 30% will go toward research, development, and technology while 15% will be for marketing. The remaining 20% will be set aside for working capital, potential acquisitions, and investments.
DouYu is one of China’s top livestreaming platforms, and it originally planned to launch its IPO in May. However, the company decided to postpone it when President Donald Trump threatened to increase tariffs on China. As it stands, the Wuhan-based company is still launching its IPO a year later than its biggest competitor in China, Huya Inc (NYSE: HUYA) went public in the United States. Huya’s stock has risen 107% from the $12 issue price in May 2018’s IPO.
The Tencent Connection
Giant technology conglomerate Tencent Holdings backs both livestreaming platforms, with $632m invested into DouYu. Tencent will own about 37% of the outstanding shares in DouYu through its subsidiary, Nectarine Investment, allowing the group to appoint up to two directors. Sources familiar the matter said that DouYu initially considered a Hong Kong listing before going with New York. However, the Hong Kong stock exchange was uneasy with the fact that Tencent was one of the company’s largest shareholders while owning a stake in Huya. The decision to push ahead with the IPO comes despite how other high-profile tech companies are keeping their plans on hold, as trade relations between the US and China have chilled investor sentiment. But DouYu reconsidered its decision after turning a profit in Q1 2019. Even with a low price range, the listing is expected to bring in $775m. Monthly active users in China rose to 159m during the first quarter, up 32m from the previous year. The number of paying users also rose from 2.4m to 6m. Additionally, the company has around 6m streamers, with about 5.2K of its most popular broadcasters under contract with the company.
The DouYu IPO is expected to list on the NASDAQ under the symbol “DOYU” on July 17. Bookrunners for the listing include Morgan Stanley, JPMorgan, Bank of America Merrill Lynch, and CMB International Capital.