Bilibili’s US shares stay soft ahead of Hong Kong start

• Bilibili (Nasdaq: BILI) share price sheds 0.8% day-on-day
• Its Hong Kong secondary listing was priced below the initial target
• The counter will begin trading in Hong Kong on 29 March 2021.
• On average, analysts target Bilibili’s US shares to hit US$159.21
• Trade today’s most popular stocks with an IG account

Bilibili shares fall further

Nasdaq-listed shares of Bilibili, which operates a video app popular with young Chinese video-game and animation fans, finished Tuesday 0.8% lower at US$105.99.

Bilibili’s New York stock price was weighed down further by the lower-than-expected offer price for its secondary listing in Hong Kong.

The shares have also slumped since their all-time high of US$156.37 in early February 2021, following controversy regarding one of its anime series.

Nevertheless, analysts remained overwhelmingly bullish on the BILI stock, with 37 recommending ‘buy’, one rating ‘hold’ and none with ‘sell’ calls. Their average target price as of Tuesday was US$159.21, Bloomberg data showed.

Lack of investor appetite?

Bilibili raised US$2.6 billion from its Hong Kong share sale, well below the initial target of about US$3 billion or HK$988 per share.

The offer price was finalised on Tuesday at HK$808 per share, or about US$104.06. That is 2.6% lower than Bilibili’s Nasdaq closing price of US$106.88 on Monday.

The less-than-expected capital raise reinforced a sombre investor mood towards Chinese technology stocks, Reuters reported.

Bilibili will start trading in Hong Kong on 29 March 2021 under stock code ‘9626’.

Investors have become wary of a fundraising flurry in Hong Kong, prompting concerns that appetite for new deals could be shrinking, Reuters reported. US-listed Chinese search engine giant Baidu made a lacklustre Hong Kong debut on Tuesday, bucking the trend of first-day IPO pops on the city’s stock exchange.

Why is Bilibili raising funds?

Bilibili - whose backers include Tencent, Alibaba, and Sony - started as an animation site, but has broadened its offerings to include documentaries, music videos, e-sports, and comics. It generates revenue from advertising, live-streaming, and premium memberships.

Half of the Hong Kong deal proceeds will go into boosting user and content growth. The rest is for research and development to enhance the user experience and commercialisation capabilities, and for marketing.

Huatai Research, maintaining ‘buy’ and a US$134.10 target on BILI shares, said the Hong Kong IPO could provide more capital support for the company to achieve its long-term goals.

‘Video-based content is becoming a mainstream online entertainment format in China, with ample monetisation opportunities,’ Huatai added. It foresees Bilibili’s free cash flow staying negative at RMB2.6 billion in 2021 and RMB0.5 billion in 2022, before turning positive in 2023.

Bilibili boasted 202 million monthly active users at end-2020, up 55% from a year ago.

Bloomberg Intelligence analysts believe the second listing may provide ‘further ammunition’ for Bilibili to reach its target of 400 million users by 2023. ‘Cash raised may be used to invest in content aimed at gaining a broader audience,’ they noted.

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