China’s NetEase Picks Banks for Hong Kong Second Listing

(Bloomberg) — NetEase Inc. picked banks for its planned second listing in Hong Kong, according to people familiar with the matter, joining other Chinese technology companies in tapping the city’s stock market for new funds.

The company is working with advisers including Credit Suisse Group AG and China International Capital Corp. Ltd. on the offering, which it has confidentially filed with the stock exchange, the people said. The share sale could happen as soon as the second half of this year, one of the people said.

The Hangzhou-based online gaming and entertainment company, which currently trades on the Nasdaq, has a market value of about $43 billion. Shares of NetEase have risen 7.5% this year, outperforming the 2.9% decline in the Nasdaq Composite Index.

No final decision has been made on the details of the offering including size and timeline, the people said. Representatives for NetEase, Credit Suisse and CICC declined to comment.

NetEase was among the Chinese enterprises that discussed secondary listings with Hong Kong Exchanges & Clearing Ltd. after Alibaba Group Holding Ltd. raised $13 billion in its 2019 secondary share sale, Bloomberg News reported in January. Chinese e-commerce giant JD.com Inc. has also filed confidentially for a second listing in the financial hub, people familiar with the matter said.

Shares in Hong Kong Exchanges & Clearing extended gains to as much as 2.9% following the Bloomberg News report.

Sales of mobile games are surging this year as coronavirus-driven lockdowns and other social distancing measures have led to more time and money spent on gaming, according to Bloomberg Intelligence analysts Matthew Kanterman and Vey-Sern Ling. Tencent Holdings Ltd. and NetEase are the market leaders in iOS mobile games, and the analysts said they expected the duo to maintain their leads. NetEase has a 6.1% share of the category, according to analytics firm Sensor Tower.

Games developed by NetEase are among the most popular in China, including the hit titles Fantasy Westward Journey 3D and Knives Out. The company also operates international online games locally, such as Activision Blizzard Inc.’s World of Warcraft.

While still reliant on gaming for the bulk of its revenue, NetEase is competing with Tencent and Alibaba to provide a diverse set of online services, including music streaming and online education, to the world’s second-largest economy.