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NetEase plans to launch in Hong Kong for a second time on June 11 and is expected to raise up to $3 billion, according to Reuters. NetEase plans to list on the Hong Kong Stock Exchange for a second time, and the changes in the capital market environment have a lot to do with. After Luckin’s financial fraud triggered a crisis of confidence in china’s stock market, the NASDAQ exchange changed the rules for listing companies, raised the threshold for listing, and increased regulatory penalties.
In fact, as early as 2018, NetEase CEO Ding Lei has expressed the willingness to return to Hong Kong stocks. And this china stock crisis event, for the NetEase Hong Kong Stock Exchange listing provides an opportunity.
According to industry analysis, NetEase in the Hong Kong Stock Exchange on the second listing to raise funds will be mainly invested in the game business. On May 20, NetEase released 20 game announcements at a one-time launch, and it can be seen that NetEase will continue to focus on the next major power game field. It is also not difficult to understand that the domestic game market competition is increasingly fierce, which makes the game as the main business of net ease face no small challenges, power game is also reasonable.
Short tide into the listing fuse
After luckin’s financial fraud broke out, the Chinese-owned companies were subjected to a round of sniping. With who to learn, Ai Qiyi and other domestic enterprises have received short-sing agency announcement, for a time, the Chinese general stock enterprises seem to have been hit the “fake” label. The founder of Hunshui even said in an interview that 30 per cent of Chinese companies’ revenues were fabricated.
Under the crisis of confidence in China-U.S. stock, the U.S. also began to sell for China-General Stock. On May 19th Nasdaq raised its IPO to more than $25m in a new restriction announcement and strengthened financial reviews of listed companies, and the U.S. Senate recently passed the Foreign Companies Accountability Act, which aims to tighten restrictions on foreign-listed companies.
Under the adverse circumstances of foreign market environment, many Chinese-owned enterprises began to accelerate the return to the Chinese market. In the latest news, JD.com and NetEase plan to list second in Hong Kong in June. Among them, NetEase is expected to raise up to 3 billion U.S. dollars, NetEase’s return to Hong Kong stocks, in addition to foreign market influence, but also with the Hong Kong Stock Exchange’s policy reform inseparable.
In 2018, the Exchange deepened reforms, liberalizing equity structure restrictions and allowing mainland companies to list on second-tier listings. As a result of the policy, Alibaba will be listed on the Hong Kong Stock Exchange for the second time in 2019, when the Hong Kong Stock Exchange was the world’s stock exchange fund-raising champion. Since then, the return of Chinese shares to Hong Kong stocks has formed a boom.
NetEase CEO Ding Lei said in an interview that there is a willingness to return to Hong Kong stocks, but at the same time said that the basic economic system is not perfect, the capital environment is not good, is not conducive to NetEase listing. And this Luckin event fermentation, no doubt for NetEase to return to Hong Kong stocks to create a good time. Under the situation of unfavourable foreign markets and improved domestic capital environment, NetEase’s second listing of the Hong Kong Stock Exchange is logical.
HKEx listed, raising money or smashing into the game
The gaming business has always been a pillar of NetEase’s revenue. NetEase’s Q1 2020 results show that net income in the first quarter was RMB17.1 billion, of which the gaming business net income was RMB13.5 billion, with revenue accounting for 78.9 percent. The gaming business accounts for 78% of NetEase’s revenue, as seen as its leading position in NetEase revenue.
From netease’s recent developments is not difficult to see, NetEase gradually returned the business focus to the game. At the recent 520 launch, NetEase launched 20 games in one breath.
In addition to the launch of fantasy west tour, big talk west tour and many other ip games pc, Mobile game version, NetEase also announced the first race game – “Ace Racing.” The game is a 3D race game produced by NetEase in partnership with McLaren, and the only race game that NetEase is currently releasing. As a partner, McLaren is famous in the racing industry for its F1 cars, giving players a higher expectation of the game.
In addition, Mobile game Diablo: Immortal, a partnership between NetEase and blizzard, a well-known gaming developer in the industry, is also on the list. According to NetEase’s official details, Diablo: Immortal continues Diablo’s previous design concepts and map elements, adding the role of the Orion, as well as new monsters and enemies, in an attempt to restore the unique gaming experience of the Diablo series at the Mobile game end.
NetEase launched a number of new tours at once, the next must face the financial pressure of game research and development. As we all know, the game is a high-cost investment industry. A game starts in the millions of dollars, from research and development to operation. For example, the industry-famous Call of Duty series costs $1 billion.
From this point of view, NetEase to Hong Kong secondary listing motivation is also clear, to mitigate the high cost of game research and development is certainly one of the links. Moreover, the competition in the game market is becoming more intense, and it makes sense for NetEase to invest more money in new travel research and development.
Competition in the Stock of the Game Industry: Game with Tencent
The sudden outbreak in 2020 has created a whole new opportunity for the gaming industry. Affected by the outbreak, the overall revenue of the gaming industry increased, NetEase Q1 revenue increased 18.3% from last year. But as revenues grow, competition in the gaming industry has become more intense.
During the outbreak, NetEase Mobile Game’s new work, Operation Fengyun Island, gained 300,000 players. During the same period, Activision Blizzard, Fist these well-known foreign gaming companies have also launched new works, occupythedomestic game market.
In the domestic game market, NetEase also has one of its biggest rivals, Tencent. Tencent’s share of the Mobile game market in 2019 is as high as 49%, and NetEase’s share is 20%. Compared with Tencent’s strength in the gaming industry, NetEase is still relatively inferior.
On the one hand, Tencent’s main social business is a large, to a large extent to save Tencent game promotion and operating costs, on the other hand, Tencent relies on the strong strength of social and capital, the animation industry game, reducing the risk of loss of game operations. For example, On May 27th Tencent officially released Mobile game Under One Person, an adaptation of the hit anime of the same name, “Under One Man”.
Compared with Tencent, NetEase’s advantage is also in IP games. Dream West Tour, Big Talk West Tour these games with independent intellectual property rights are popular with older players, and NetEase is expected to launch this year’s new “Diablo: Immortal” is also an IP game, this game after the announcement of diablo fans.
Although NetEase has released a number of IP games, it still lacks truly critical lying works. “OverWatch” as NetEase’s most successful end tour, by the players. But apart from OverWatch, none of the other end-shows have performed well, and the hot-marketPUBG game Wilderness Action is deeply involved. Mobile game has released as many as 105 works, and only a few of them are really hot, making the challenge even more daunting.
With the game industry into the stock era, the game products to the direction of fine operation. NetEase games want to further develop, improve the quality of game content has become the key.
NetEase plans to list on the Hong Kong Stock Exchange, either with the aim of using the funds it raises to improve game content in game research and development. However, in the new game products emerge endlessly, the domestic game market competition is increasingly fierce, the future of NetEase will still face no small challenges.