Tencent's e-book IPO sets stage for music arm's debut

Customers can access 9.6 million electronic titles through China Literature's QQ Reading app. For its initial public offering, the Tencent unit and existing investors priced 151 million shares at HK$55 apiece, the top end of a marketed range, said s
Customers can access 9.6 million electronic titles through China Literature's QQ Reading app. For its initial public offering, the Tencent unit and existing investors priced 151 million shares at HK$55 apiece, the top end of a marketed range, said sources. China Literature will make its market debut next week.PHOTO: BLOOMBERG

China Literature raises $1.5b in Hong Kong; music unit's share sale may be held next year

HONG KONG • China Literature, the online reading unit helping Tencent Holdings build an entertainment empire, raised US$1.1 billion (S$1.5 billion) alongside existing investors in its Hong Kong initial public offering (IPO), according to people with knowledge of the matter.

The operator of the QQ Reading app and existing investors priced 151 million shares at HK$55 apiece, the top end of a marketed range, the people said, asking not to be identified because the information is private.

At the IPO pricing, China Literature would have a market capitalisation of HK$49.9 billion (S$8.7 billion). Shares will begin trading next Wednesday, according to the prospectus.

The Tencent unit sells electronic books in a model similar to Amazon.com's Kindle Store, which offers different titles in China than in the United States and elsewhere. China Literature had 9.6 million works and 6.4 million writers as of June 30, according to its prospectus.

Customers can pay for an entire book at once, or buy a few chapters at a lower price before determining whether to keep reading.

The company also wants to leverage its works into other forms of entertainment, such as movies, TV series and anime, as Tencent aspires to create a Marvel-like empire.

Shenzhen-based Tencent became China's second-biggest technology company on the strength of its WeChat messaging app, which since has morphed into a portal for shopping, banking, gaming and entertainment.

Tencent's music unit, which provides a Spotify-like streaming service, is seeking bank pitches for an IPO that could raise at least US$1 billion, people familiar with the matter said yesterday.

Tencent Music Entertainment Group has asked advisers to pitch for a role on a share sale that could take place next year in Hong Kong or New York, according to the people.

Tencent Music was spun out from its parent after merging with China Music Corp.

It has deals in place to distribute songs from artists including Beyonce and Taylor Swift via licensing rights with some of the world's largest record labels, including Universal Music Group, Warner Music Group and Sony Music.

Retail investors were enthusiastic about the Tencent e-book spin-off, placing orders for more than 600 times the stock initially available to them in the IPO, people with knowledge of the matter said earlier. The portion of the deal reserved for institutional money managers was also oversubscribed by several times, the people said.

The Hong Kong overnight interbank rate, known as Hibor, approached a nine-year high this week partly due to retail investors locking up funds for a clutch of IPOs, including China Literature.

China Literature's offering is the fifth-largest IPO in Hong Kong this year, according to data compiled by Bloomberg.

Shares of Tencent rose as much as 1.5 per cent yesterday in Hong Kong to the highest in about two weeks.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 02, 2017, with the headline 'Tencent's e-book IPO sets stage for music arm's debut'. Print Edition | Subscribe