DouYu International Holdings

[cyclone]

Tencent-backed live-streaming firm DouYu prices U.S. IPO at low end of range

Joshua Franklin, Julie Zhu
JULY 17, 2019 / 9:06 AM 

NEW YORK/HONG KONG (Reuters) - DouYu International Holdings Ltd DOYU.N, China’s largest live-streaming platform, on Tuesday said it sold $775 million in stock at a $3.73 billion valuation after pricing its U.S. initial public offering (IPO) at the bottom of an indicative range.

DouYu, which is backed by Chinese social media and gaming giant Tencent Holdings Ltd (0700.HK), sold American depositary shares (ADS) at $11.5 each, compared with a previously stated target of $11.50 to $14.00, the firm said in a statement. Every 10 ADSs represent one ordinary share.

That makes the deal the largest Chinese IPO in the United States so far in 2019, eclipsing that of Luckin Coffee Inc (LK.O) which raised $645 million, according Refinitiv data.

However the weak pricing opens questions about the necessity of DouYu’s decision in May to put its IPO on hold amid a global markets sell-off stemming from U.S.-China trade tensions.

The IPO was also a test of U.S. investor demand for Chinese stocks after Anheuser Busch InBev NV (ABI.BR) called off the Hong Kong listing of its Asia-Pacific brewing business due to weak orders from U.S. “long only” fund managers.

DouYu, which primarily focuses on the live-streaming of games, is one of several Chinese start-ups in the growing market for live-streaming in the world’s second-biggest economy, along with Huajiao and U.S.-listed Huya Inc (HUYA.N).

DouYu has exclusive streaming rights to 29 major tournaments in China, including League of Legends, PlayerUnknown’s Battlegrounds and DOTA2, according to its IPO filing.

The rapid growth of the live-streaming sector has seen China’s tech heavyweights - Tencent, Alibaba Group Holding Ltd (BABA.N) and Baidu Inc (BIDU.O) - open their wallets to back a slew of firms in the hope of boosting existing services in e-commerce, social networking and gaming.

DouYu’s losses in 2018 widened to 876.3 million yuan ($127.43 million) from 612.9 million yuan a year earlier, its prospectus showed. The company did, however, report a profit of 18.2 million yuan for the first three months of 2019.

Of the shares on sale in the IPO, DouYu sold two-thirds to raise $517 million, with the remainder sold by existing investors.

More details in https://www.reuters.com/article/us-douyu...SKCN1UC058

[ksir]

Wow special cash dividend of US$9.76 per ordinary share.
https://ir.douyu.com/2024-07-03-DouYu-In...h-Dividend

Before the announcement Douyu price was about US$12.
Net dividend after considering tax is still over 50% of market cap.

Douyu's 2024-Q1 has about US$900M (cash + bank deposits) and zero debts.
If we're to discount that by 30% (of dividend tax), it came to about US$560M which is roughly US$17-18 per share.
About the same as today closing price.

It's not bad a decision to "bet" on this deep-value stock.
Has been having fun with Huya, Douyu & Weibo, those with thick cash and selling at darn cheap valuation.
So far Weibo & Douyu had special dividend, perhaps Huya next? 🤣

[specuvestor]

Thanks for the interesting observation. Why would they be paying USD dividends that attracts tax while other tech companies are issuing CB to raise USD

[ksir]

Thanks for the interesting observation. Why would they be paying USD dividends that attracts tax while other tech companies are issuing CB to raise USD

It's a puzzle to me as well, why pay such a huge dividend with 30% tax? 

Think would be far more cost effective if let's say a substantial shareholder (eg: Tencent), just offer a 50% premium on US$12 (ie: US$18) to privatise it. 
That's still substantially below their net cash and I bet the "enduring" shareholders in this so called "value trap" stock likely super happy to accept the offer.

Weibo mega dividend I was happy enough as I invested in their HK counter (0 tax). 
This round, I am inclined toward selling in Market than awaiting for 30% taxed dividend.

[weijian]

Taking a look at the company's corporate structure listed in the 2019 IPO prospectus, the myriad of layers suggest that USD dividends would never see the light of the day

https://www.sec.gov/Archives/edgar/data/..._structure

Unless the listed entity is paying the cash dividend with a loan, else the onshore entity will attract its own 10% withholding tax, before it then passes all the different layers to finally arrive in US to allow Uncle Sam to extract its corporate and dividend taxes (total another 50%?!) off the hard-earned earnings of the Motherland.