Meitu Poised For $5 Billion IPO In Hong Kong In Q4

(Chinese Version)

Wu Xinhong, founder and CEO of Meitu

Meitu Group, known for the popular Chinese photo beautification app MetuPic, is going to go public in the Hong Kong stock exchange at the end of this year.

According to Wall Street Journal, Meitu Group has submitted its application for a listing to relevant Hong Kong regulators on August, 19th. It is reported that Meitu Group is looing forward to an IPO in the fourth quarter of this year and expects to raise $500 million to $1 billion. However, Meitu s spokesman declined to comment on the matter.

On August, 22nd, Wall Street Journal Chinese Website again posted a piece of Weibo and reported that Meitu s valuation would reach $5 billion in the IPO. This April, Meitu completed its Pre-IPO round of financing led by Taiwanese electronics maker FOXCONN and Tiger Global Management and raised $3.8 billion in total.

As early as this April, we ve also reported that Meitu planned to go public in the Hong Kong stock exchange at the end of this year to reverse losses.

Public data suggest that in the last round of financing, Meitu s president Cai Wensheng ad CEO Wu Xinhong held 38.6 per cent and 15.6 per cent stake, respectively. In total, they held over half stake in the company. Besides, core employees of Meitu own 3.2 per cent stake. Meitu s other investors include: strategic shareholder FOXCONN (1.7 per cent), Tiger Global Management (11 per cent), IDG Capital (9 per cent), Qiming Venture Partners (7.7 per cent), Huaxia Fund (7 per cent) and Innovation Works (3.8 per cent).

Some insiders believe that Meitu chose to go public in the Hong Kong stock market instead of the Chinese or American stock market because they wanted to stike a balance between expediting the internationalization process and the fact that the majority of their users are in China. “We want to get closer to our users,” Meitu s spokesman suggested. By the way, Forgame Holdings and Feiyu Technology, both of which were invested by Cai Wensheng, had already listed on the Hong Kong stock market.

However, some analysts don t think so, believing that investors pressure is the real reason why Meitu chooses to go public in the Hong Kong stock market. Meitu s first investment came from Cai Wensheng s Longling Capital seven year ago. Yet, Meitu hasn t become profitable yet, so it must be facing increasing pressure from its old investors. In addition, Meitu is also afraid that American investors might not recognize Meitu s potential, as did many Chinese firms in the American stock market this year.

According to some insiders, if Meitu succeeded in its IPO as planned, it will become the second largest IPO (after Tencent) in the Hong Kong stock market, which will certainly encourage other Chinese startups to go public in Hong Kong.

By the end of July, tech companies only take up 10 per cent of the total valuation of the Hong Kong stock market. Tencent Holdings, with a valuation of $244 billion, is the biggest one among all the tech companies. Since tech companies only account for a small share in the Hong Kong stock market, Meitu believes that analysts and portfolio managers will give Meitu a higher market valuation.

Moreover, Meitu will benefit from the launch of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, cross-boundary investment channels that connects the Shanghai Stock Exchange and the Hong Kong Stock Exchange, Shenzhen Stock Exchange and Hong Kong Exchange. Up till now, major progress has been made in terms of the latter channel. On August, 16th, Premier Li Keqiang pointed out that the government had already been well-prepared for the launch of Shenzhen-Hong Kong Stock Connect and would soon approve the Implementation Plan of the Shenzhen-Hong Kong Stock Connect.

Unfortunately, Meitu is popular but still not profitable. Meitu s founder and CEO Wu Xinhong also admitted several times that user retention rate of photo beautification apps is very low, and the revenue model is very simple, making them easy to be replaced.

Meitu, focused mainly on developing photo and video editing software and products, was founded by Cai Wensheng and Wu Xinhong in 2008. MeituPic and Meipai are flagshop products of Meitu, while it also enters the hardware market and develops cameras and smartphones specialized in photo editing.

Meitu Smartphone M6 and its celebrity endorser AngelaBaby

According to Meitu s official data, Meitu s apps have been installed on over 1 billion mobile gadgets around the world, and the number of countries and regions where there are already over 1 million registered users also reaches 18. At present, Meitu s photo editing apps include MeituPic, BeautiCam, BeautiPlus and MakeupPlus, etc. Up till now, Meitu has over 742 million users around the world, and over 210 million pictures on average are edited by Meitu s apps every day.

In addition, Meitu has invested in other related startups in the past few years, including HiScene, which is focused mainly on smart photo recognition and visual interaction technologies, echo, faceu and Wecut, which all target young users, international photo social platform Migme, professional beautification platform Meilidoor as well as Eyete Technology, which is focused on smart hardware and photo & video technology.

The series rounds of financing of Meitu:

January, 2009: Raising over $1 million in Angel round of financing, led by Longling Capital.
March, 2011: Raising over $10 million in A-round of financing, led by IDG Capital, Sina Weibo Fund and Sina Technologies.
January, 2012: B-round of financing, led by Qiming Venture Partners and Ce Yuan Ventures.
June, 2014: C-round of financing, led by Tiger Fund and Innovation Works.
June, 2016: Raising around $300 million in D-round of financing at a valuation of $3.8 billion.

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Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.