Quick Take: Tencent Turns Page Toward Listing Publishing Unit

Tencent’s online literature subsidiary has published a preliminary version of its initial public offering (IPO) prospectus after passing its prelisting hearing with the Hong Kong Stock Exchange.

China Literature Ltd. is on its way to becoming the country’s first listed internet publisher. Reports from earlier this year placed the targeted size of its IPO at between $600 million and $800 million, which would make it one of this year’s largest China internet offerings.

China Literature’s total revenue was up by 92.5% from 999.6 million yuan ($152 million) in January through June 2016, to 1.9 billion yuan in the same period this year, according to its Post Hearing Information Pack. The company reported a net profit of 213.5 million yuan for the first six months of 2017, compared with a net loss of 2.4 million yuan in the same period last year.

As of June 30, the literature platform was offering 9.6 million works by 6.4 million writers, and had 191.8 million users on average each month in the first half of this year.

China Literature expects the country’s online literature market to grow from 11.4% of the total literature market in 2016 to 22.7% in 2020, expanding faster than the other two segments of the market — e-books and paper books, the company said. The online literature market was worth 4.6 billion yuan in 2016.

The company also said that failure to grow user engagement and control content-related costs were some of the major risks it faces.

Tencent currently indirectly controls 65.38% of China Literature’s issued shares. The subsidiary did not disclose how large this stake will be after the planned IPO.

Contact reporter Teng Jing Xuan (jingxuanteng@caixin.com)