KE Holdings, the China-based online estate agent also known as Beike, is going public today in a $2.12bn initial public offering in which internet group Tencent is investing $160m.
The offering consists of 106 million American depositary shares (ADSs), each equating to three ordinary shares, that will be issued on the New York Stock Exchange priced at $20.00 each. The price is above the $17 to $19 range the company set last week, valuing it at about $22.6bn.
Tencent is buying 8 million ADSs while hedge fund manager Hillhouse Capital is paying $100m for 5 million ADSs and venture capital firm Sequoia Capital is buying 3.5 million for $70m.
KE Holdings was formed in 2001 as real estate brokerage Lianjia before adding Beike as an online and offline platform that manages real estate transactions. The combined platform provides access to 260 real estate brokerage brands and had 39 million monthly active users as of June this year.
The company increased revenue 39% to approximately $3.86bn in the first six months of 2020 while almost tripling net income to more than $227m.
Telecommunications and internet group SoftBank invested $1bn in KE Holdings as part of a $2.41bn round that closed in November 2019 at a $14bn valuation. Tencent, Hillhouse Capital and Sequoia Capital China also participated.
The company, then known as Ke.com, reportedly raised nearly $1.2bn in a July 2019 series D round featuring $800m from Tencent and additional cash from property developer Country Garden, Gaw Capital Partners, Gaochun Capital, Source Code Capital, New Horizon, Huaxing Capital and Strait Capital.
Real estate developer China Vanke invested $436m in Lianjia in April 2017 through a private placement, three months after another property developer, Sunac China Holdings, provided $625m at a $6bn valuation. Huasheng Capital had led a $927m series B round for the company the year before that included Tencent, fellow internet company Baidu.
KE Holdings’ founder and chairman, Zuo Hui, remains its largest shareholder post-IPO, with a 42.4% stake. Tencent’s was diluted slightly from 12.3% to 12.1%, the stake held by SoftBank’s Vision Fund was cut from 10.2% to 9.3% and Hillhouse’s share of the company fell from 5.3% to 5.2%.
Goldman Sachs (Asia), Morgan Stanley, China Renaissance Securities (Hong Kong), JP Morgan Securities and China International Capital Corporation Hong Kong Securities are joint bookrunners for the IPO while UBS Securities, CLSA, Credit Suisse Securities (USA) and CMB International Capital are co-managers.
The underwriters have 30 days to take up an option to buy up to 15.9 million additional shares, which would boost the size of the offering to almost $2.5bn.
