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NetEase reportedly delays IPO of music streaming service

NetEase

NetEase’s Hong Kong listed shares lost nearly 14% last week after it was reported China’s gaming sector could face regulatory scrutiny

NetEase Inc has delayed the $1 billion Hong Kong initial public offering (IPO) of its music streaming service Cloud Village amid volatile trading in China’s major tech companies, two people with direct knowledge of the matter said.

The people could not be named as the information was not yet made public.

A NetEase spokesperson said the company had no immediate response.

According to filings lodged with the exchange, the IPO was approved by the Hong Kong Stock Exchange’s (HKSE) listing committee and preliminary meetings were held with potential investors last week.

The deal was due to launch this week but was put on hold on Monday, the sources said, given the uncertain conditions facing China’s tech companies following a regulatory crackdown ordered by Chinese officials.

NetEase’s Hong Kong listed shares lost nearly 14% last week after it was reported China’s gaming sector could be next in line for intensified regulatory scrutiny.

The stock is 4.1% higher on Monday.

NetEase announced in May it would spin off Cloud Village and retain 62.4% ownership of the streaming business.

According to its May regulatory filings, NetEase also planned to retain no less than 50% of the voting power in the company due to its voting structure.

Cloud Village had aimed to raise up to $1 billion in the Hong Kong IPO, one of the sources said.

According to the firm’s listing documents, Alibaba Group Holdings, Baidu Inc, General Atlantic and Boyu Capital are Cloud Village investors.

Cloud Village’s parent NetEase also saw a sell-off after Chinese state media criticized the games industry, leading investors to look for the firms next in line for scrutiny.

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