‘The biggest IPO since Uber’: Everything you need to know about Kuaishou, the multi-billion dollar TikTok rival

It has more engagement than Snapchat and Twitter, it is the second-biggest short-form video and livestreaming service in China, and it has a reported value of over $60bn. You may not have heard of it, but Kuaishou is quietly inserting its sphere of influence over the tech world. On the brink of its stock market debut, here’s everything you need to know about the latest rival to TikTok’s seat of power.

Launched in 2011, the company was co-founded by Su Hua, a former programmer at Baidu and Google who initially created Kuaishou as a GIF-making app, before transforming it into a pioneer in its current field. Meaning ‘fast hand’ in Chinese, it is pipped, domestically, only by ByteDance’s Douyin app, which is said to be twice the size of Kuaishou, with a reported 600 million daily active users in August.

The Beijing-based startup is currently backed, in part, by Tencent, a Chinese gaming and social media conglomerate which has a 22 per cent stake and whose vast portfolio includes Fortnite and WeChat.

Su Hua original founded Kuaishou as a GIF-maker in 2011

Kuaishou is slated to make its Hong Kong stock exchange debut imminently, with speculation suggesting that the deal could land the company a valuation of around $61.7bn, a sum far higher than the $28.6bn price tag it received during a funding round in 2020.

According to reports, the listing could raise well up to $6.3bn of new capital – if underwriters decide to exercise a greenshoe option that would issue more shares than originally planned – with the firm willing to dish out approximately 365 million shares, each at a price between $13.55 and $14.84. It is said that the final price will be confirmed by end of Friday, at the latest, and that the listing will occur in Hong Kong on 5 February, a week before Lunar New Year. If pulled off, it will be the biggest tech IPO since May, 2019, when Uber sought a valuation of $82.4bn on its market debut.

So far, some ten cornerstone investors – including BlackRock, Invesco and Abu Dhabi Investment Authority – will buy stock worth approximately $2.45bn, with a six-month lock-up agreed, while China Renaissance, Bank of America Securities and Morgan Stanley will assist the flotation.

In its 861-page updated prospectus – a document that declares: “We aim to be the most customer-obsessed company in the world” – Kuaishou revealed that its daily average usage went beyond 306 million in November – more than Snapchat and Twitter – and that it now claims over 769 million monthly active users. By contrast, it had a daily average of 67 million viewers only four years ago. The average daily time spent on the app has passed the 100-minute-mark, too.

However, since 2017, the firm has failed to turn a profit – it was reported that it made an operating loss of $1.4bn in sales, between January and September, 2020, and a total annual net loss of $15bn. Despite this, on news of the IPO, Tencent shares swelled to 11 per cent on Monday, an unprecedented high.

Rival ByteDance, which also operates TikTok, has also been slated for a public offering, but has recently faced battles with the Trump administration, which tried to ban the app in the US, on grounds of national security.

In the first half of last year, the app made over two-thirds of its revenue from livestreaming, whereby users purchase virtual “tips”, which can cost between a few pennies to just over £200, to gift to hosts, who typically lip sync songs, undertake viral challenges or broadcast their gameplay. Moreover, in the first nine months of 2020, advertising made up a 33 per cent of the company’s total sales. Such popularity and financial achievements come despite the fact that Kuaishou’s user base is younger and more rural than that of rival Douyin’s.

However, in November, Beijing introduced new measures that not only limit the purchase total of any one user, but also ban teenagers from spending on gifts altogether. Investors may also be concerned about the power that celebrity influencers have on the company’s finances; notably, in 2019, sales star Xinba brought in $57m in sales on Kuaishou’s November 6 shopping festival.

"Chinese tech companies are under the microscope, with regulatory bodies now willing to do more than slap wrists..."

Officials have also introduced restrictions on livestreaming ecommerce, another revenue stream for Kuaishou, in which hosts promote goods to viewers. For example, platforms will have to provide two-week’s notice to the government before a major ecommerce livestream takes place.

Such bureaucratic action points to the wider issue at hand, as although Kuaishou’s impressive IPO valuation underscores the fact that the country’s infatuation with short-video apps is ripe, the move has come during a period in which Chinese tech companies are under the microscope, with regulatory bodies now willing to do more than slap wrists, as tech magnate Jack Ma knows too well. In December 2020, officials launched antitrust investigations into Ma’s ecommerce behemoth Alibaba, while in the month prior, its financial affiliate Ant Group had its IPO – set to be the largest of all time at $37bn – blocked, just two days prior to its shares being slated to trade in Hong Kong and Shanghai.

In response to these new rules, Kuaishou’s prospectus addresses the company’s need to expand its channels of revenue: “We are actively developing additional monetisation opportunities to diversify our revenue streams through online games, online knowledge sharing and other products and services,” it reads.

Moreover, like Douyin, the company may venture into payment services.

When discussing his startup’s future during a conference call to investors, co-founder Su said: “We are exploring live-streaming in local life services and knowledge sharing… We’ll also try to use short videos and live-streaming, both based on the fan-host relationship, to transform one industry after another. That’s a driving force for our future growth.”

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