Sogou, the China-based search engine operator backed by internet companies Sohu and Tencent, is set to float in the US today after pricing a $585m initial public offering yesterday.
The company will issue 45 million American depositary shares (ADSs) on the New York Stock Exchange priced at $13.00 each, at the top of the $11 to $13 range it set late last month.
Sogou has built an artificial intelligence-equipped search engine that had a 17.8% share of China’s mobile search market as of September this year, according to market research firm iResearch.
The company was formed in 2005 by Sohu. Tencent invested $448m in Sogou in 2013 as part of a strategic partnership deal, and the latter’s current success in the market can be partially attributed to it being the default search option for Tencent’s QQ browser.
Sohu retained a 37.8% stake that was cut to 33.4% in the offering while Tencent’s stake was diluted from 43.7% to 38.7%. Charles Zhang, Sogou’s founder and chairman, held a 9.2% stake through a vehicle called Photon that was diluted to 8.2% in the IPO.
Sogou intends to put $150m of the IPO proceeds into research and product development, with artificial intelligence and big data a priority, and $50m into sales and marketing.
JP Morgan, Credit Suisse, Goldman Sachs, and CICC are joint bookrunners for the offering while China Renaissance Securities is co-manager. They have the 30-day option to buy a further 6.75 million ADSs, which would increase the size of the IPO to approximately $673m.