Despite market gyrations hurting investor sentiment, and growing regulatory curbs on the Chinese mainland’s mobile game business, the journey of the mobile games distribution arm backed by tech titan Tencent Holdings to Hong Kong’s stocks trading floor sounds somewhat inspiring.
Shares of iDreamSky Technology Holdings opened flat at HK$6.60 apiece -- the company’s IPO price – in its debut on the city’s bourse on Thursday, gaining momentum from Wednesday’s performance when the company’s shares closed 4.24 percent higher at HK$6.88 in gray market trading.
iDreamSky Technology shares, however, closed 8.64 percent lower at HK$6.03 in Thursday’s debut after touching a low of HK$5.90 and briefly peaking at HK$6.76 in the morning session.
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Defying signs of strain in the local stock market, the retail portion of iDreamSky’s IPO, which raised a total of 745.3 million yuan ($108.1 million, HK$846.6 million), was oversubscribed by almost 13 times. Investors who have subscribed for 10 board lots of the company’s shares will get just one lot with a success rate of 35 percent.
iDreamSky had set an indicative price range of between HK$6.0 and HK$7.8 for a total of 127 million shares on offer, comprising 114 million international shares and 13 million Hong Kong shares for a board lot of 400 shares with a minimum investment of HK$3,151.
Known for its distribution of a broad range of blockbuster overseas titles, including Angry Bird, Fruit Ninja, Subway Surfers and Temple Run, the Shenzhen-based enterprise timed its take-off by venturing into the mobile games sector when the market focus was then mainly on PC games and top-grossing mobile games like Tencent’s King of Glory, while NetEase Games’ Onmyoji is yet to come.
“The company’s Hong Kong listing marks the culmination of a remarkable growth story from humble beginnings and great foresight, and the start of a clutch of bold moves to build up an entertainment business empire,” Michael Chen Xiangyu, co-founder, chairman and chief executive officer of iDreamSky, told a listing ceremony at the Hong Kong Stock Exchange on Thursday.
Chen, who founded iDreamSky in 2011, cited the quote: “The cowards never started, and the weak dies along the way - that leaves us” from Phil Knight, the quintessential entrepreneur and legendary founder of Nike, as a motto that has essentially led a promising company to a becoming a newly minted tech superstar and the flag-bearer of the nation’s burgeoning entertainment industry.
iDeamSky’s market debut coincided with the news that Sabrina Meng Wanzhou, chief financial officer of multinational Chinese mainland telecommunications equipment giant Huawei Technologies, has been detained in Canada at the request of the US government, sending jitters across global equity markets.
Chen, who hails from central Hunan province, reiterated iDreamSky’s unremitting pursuit of the “long-term investment value rather than the short-lived share price performance”.
He believed the company has the ability to post robust corporate earnings and sustain its bewildering growth rate in the coming years.
Betting on its years-long partnership with overseas game developers like Kiloo, Playrix, Peak, and domestic developers like Tencent Games and Shanda Games, iDreamSky currently owns a portfolio of 56 games in operation and as many as 25 games in the pipeline, seven of which have been granted new game licenses.
The winning growth formula to extend the life cycle of the games hinges on the company’s unique capability to obtain the source code of the games and help partnered game developers with the second round of content development, reckoned Jeffrey Lyndon Ko, co-founder and president of iDreamSky.
The company, whose chief marketing officer is Mario Ho Yau-kwan -- the son of Macao gambling magnate Stanley Ho Hung-sun -- raised more than $115 million through a Nasdaq listing in 2014, and went private two years later before filing for a Hong Kong IPO in May this year.
Regardless of sliding markets, the company has lined up HK$78 million from Japan’s Sony Corporation and Beijing-based e-commerce group JD.com as cornerstone investors, which accepted a six-month shares lockup in return for large allocations.
Sony has agreed to acquire $5 million of the shares on offer. It’s the first time the Japanese conglomerate -- the world’s second-largest gaming company by revenue – is investing in a Chinese games enterprise and subscribing to a Chinese company IPO.
The benchmark Hang Seng Index dived 2.47 percent, or 663.30 points, to close at 26156.38 Thursday.
HONG KONG NEWS