Xiaomi-backed Kingsoft Cloud Readies for Friday Debut

Will Kingsoft Cloud change the conversation surrounding Chinese U.S. companies? The cloud computing company expects to raise up to $450 million in New York.

Author: Anna Vodopyanova   

Kingsoft Cloud Holdings Ltd. (KC) set the terms of its initial public offering today for what may be one of the largest Chinese company listings in New York this year.

The spin-off of the cloud entity operated by Kingsoft Group aims to raise up to $450 million on the Nasdaq Global Select Market. Underwriters may acquire an additional 3.75 million upon the IPO, according to the prospectus filed Monday.

KC hopes to sell 25 million American depositary shares and has set the expected price range at $16 to $18 per ADS.

The parent company of KC may acquire up to $25 million in the IPO. Another existing shareholder, smartphone giant Xiaomi Corp. (HKEX: 1810), has indicated interest in $50 million worth of ADSs. French investment management company Carmignac Gestion has offered to buy another $50 million of the float, according to the filing.

Kingsoft claims to be China's largest independent cloud service provider and aims to monetize on the growing "application of 5G, AI and IoT, demand for multi-cloud and neutrality, and support by favorable government policies." It is, however, facing competition from the cloud units of Alibaba Group (NYSE: BABA; HKEX: 9988), Tencent Holdings (HKEX: 0700), and Baidu (Nasdaq: BIDU).

KC reported $568.3 million in revenue for 2019, up 78% year-over-year. Its losses have increased on an annual basis since 2017, reaching $159.6 million last year, the filing showed.

At a time when Chinese companies are eyed suspiciously by U.S. investors and a number of smaller runners, like Oriental Culture and MingZhu Logistics, wait for months for their public entry, KC's run to Wall Street has been quite speedy. CapitalWatch covered the company's first publicly filed prospectus just two weeks ago. This week on Friday, Kingsoft is scheduled to lift off.

With underwriters J.P. Morgan Securities LLC, UBS Securities LLC, Credit Suisse Securities (USA) LLC, and China International Capital Corp Hong Kong Securities Ltd., this IPO may just prove that the appetite for Chinese IPOs among American investors remains. 

After the slew of fraud surfacing at seemingly safe-haven companies including Luckin Coffee Inc. (Nasdaq: LK) and Jay Clayton's warning, KC may exhibit the kind of transparency and verified financials the U.S. investor, and not the short-seller, has been hoping for.

We at CapitalWatch hope this is the case, and we are looking forward to KC's IPO set for May 8 on the Nasdaq.

In Hong Kong on Monday, the stock in Kingsoft Corp. Ltd. (HKEX: 3888) closed nearly 4% lower, at HK$26 per share. Xiaomi's stock slipped 2% to HK$10.