On Monday, Chinese video-streaming firm Bilibili fell flat in its secondary debut on the Hong Kong stock exchange, making it the second Chinese Internet giant in two weeks to face a disappointing first day of trading in its ‘home’ market.
Bilibili raised $2.6 billion after pricing its shares at 808 HKD ($103.95) last week. Shares fell 7% in early trading on Monday. They pared those losses throughout the day and closed at 800 HKD ($102.92), a 1% drop from the offer price.
The lackluster debut mirrors that of Chinese search engine Baidu, whose stock price has dropped over 19% since the company listed in Hong Kong on March 23, and coincided with a global selloff in Chinese tech stocks.
On Monday, Bilibili CEO Chen Rui attributed the firm’s slow start in Hong Kong to that selloff, which he tied to increased regulatory scrutiny of U.S.-listed Chinese firms.
Last week, the U.S. Securities and Exchange Commission began rolling out a law signed by President Donald Trump in December 2020 that would force Chinese companies to delist from U.S. exchanges if they do not comply with more stringent auditing standards.
“The general situation across the stock market is relatively bad,” Chen said in a statement to Chinese media. “U.S.-listed Chinese stocks have experienced the biggest drop in recent years, which should be regarded as a ‘black swan’ event,” Chen said.
The prospect of increased attention from U.S. regulators, combined with Beijing’s actions to reign its own tech giants, may be creating an especially difficult environment for firms like Bilibili and Baidu.
“There is a lot of uncertainty around Chinese technology firms,” Abishur Prakash, a technology and politics consultant at the Center for Innovating the Future, said of Bilibili’s flat opening in Hong Kong. “With China cracking down on some of the biggest companies and U.S. taking shots at Chinese technologies, investors do not know where things will go next—or who will be caught in the crosshairs.”
Bilibili’s Nasdaq-listed shares are priced at $97.08, which is well below the 52-week-high of $157.66 they hit in February but still represents a five-fold increase from the start of 2020.
Bilibili’s current market value in the U.S. of $34.2 billion reflects its ballooning user base. In the fourth quarter of 2020, Bilibili said it reached 202 million monthly users, a 55% increase from the same period in the previous year. The platform’s daily users also reached 54 million people in the last quarter of 2020, up 42% from the same period in 2019.
Via both a mobile app and a web-based platform, Bilibili offers a range of user-generated content and professionally-produced television shows. The company made its name by hosting popular Japanese anime cartoons, where users could comment directly in the videos, but it has since diversified into movies, live streams, and video games.
Still, investors may be wary about the long-term prospects of a company that has not been profitable since it first debuted on Nasdaq in 2018.
In addition to tighter regulation in the U.S. and a tech crackdown in China, Bilibili faces questions about its content moderation practices.
In June 2020, Chinese regulators punished Bilibili and nine other platforms for hosting “vulgar” and other problematic content, forcing the platforms to take videos off their platforms.
In February of this year, online activists also protested Bilibili’s decision to host a Japanese anime show due to its mysogynistic content. In response, Bilibili said it would “resolutely resolve content issues” and was firmly opposed to discrimination taking place on its platform.
Chen on Monday said he wasn’t fazed by Bilibili’s sluggish Hong Kong debut and is confident about the company’s long term prospects.
“Nobody will remember whether your stock went up or down on the debut in 10 years’ time,” Chen told Bloomberg on Monday. “[China’s video streaming] market will be in ultra-high-speed growth for the next several years. Popular video platforms, like us, will all have great opportunities.”
Some investors weren’t reassured by Chen’s confidence on Monday.
“Bilibili should be well positioned in China’s exciting video streaming market, but the company remains significantly unprofitable,” says Brock Silvers, chief financial officer of Kaiyuan Capital. “Chen didn’t help sentiment by playing down the shaky open as irrelevant. [Bilibili’s lack of profitability] evidently remains relevant to traders.”