Tencent’s China Literature set for billion dollar IPO

The Chinese e-commerce titan Tencent has formally launched  its IPO, with November 8 set for its Hong Kong stock exchange debut.
The price is expected to hit $1.1 billion, with 151 million shares on offer globally. That’s an increase on original expectations, and suggests Tencent is ready to become far more aggressive in its engagement with the international online literature markets.

As reported here last week, Tencent is investing in the Canadian online literature firm Wattpad, and earlier this year partnered with SE Asia’s biggest ebook player Ookbee, based in Thailand.

According to the South China Post Tencent’s China Literature IPO filing declared

30 per cent of the net proceeds will be used to expand its ‘online reading’ business, including growing its network of ‘promising [contract] writers’ and expanding the genres of e-books. The rest of net proceeds will be used to fund the company’s potential investments or acquisitions, or for working capital and general corporate purposes.

Tencent controls 65.38 per cent of China Literature, which includes QQ Reading among many online reading portals. Other substantial investors, the South China Post notes, include US private equity firm Carlyle Group and Trustbridge Partners, a Chinese private equity firm set up by the former Shanda Group top executive Li Shujin.

China Literature (for the nearest western equivalent think Tencent as Amazon and China Literature as the Kindle store plus KU plus Kindle Worlds, etc) is the world’s largest online literature company by volume, fielding almost ten million titles, and with 191.8 million monthly active users (93% using the service on their mobile phones). With 5.3 million writers Tencent has 88.3% of China’s online authors.

For the IPO China Literature has had to offer much more detail publicly than we are used to.

Within China’s literature market, online literature has grown the fastest, experiencing a CAGR (compound annual growth rate) of 44.9 per cent from 2013 to 2016, and is projected to continue to grow at a CAGR of 30.9 per cent from 2016 to 2020.

In 2016, the value of China’s online literature market was 4.6 billion yuan ($633 million), accounting for 11.4 per cent of the total literature market, according to China Literature’s IPO filing, with that figure expected to double by 2020.

Other sources of revenue for China Literature include intellectual property operations, printed books, online games and online advertising.

The top ten online literature authors in China each earn the equivalent in USD of more than $150 million a year.

Leave a Reply

Your email address will not be published. Required fields are marked *