China-based online answer platform developer Zhihu will go public today in a $523m initial public offering representing an exit for corporates Kuaishou, Tencent, Baidu, Sogou and Sunshine Insurance.
The offering consists of 55 million American depositary shares, each representing half a common share, priced at $9.50 each, at the foot of the IPO’s $9.50 to $11.50 range.
The company will float on the New York Stock Exchange and the offering will take place alongside a $250m private placement consisting of $30m from internet group Tencent, $100m each from e-commerce groups Alibaba and JD.com, and $20m from video game developer Lilith Games.
Zhihu runs an online platform with 76 million monthly active users who can post up questions in order to get crowdsourced answers. It more than doubled its revenue to $207m in 2020 while cutting its net loss from $150m to $79.3m.
Approximately 35% of the IPO proceeds have been earmarked for product development while 30% will be channelled into user acquisition and marketing activities and 25% into bolstering Zhihu’s technology through research and development.
The offering follows about $890m in funding. Tencent first invested in Zhihu in 2015 when it led a $55m series C round valuing the company at $300m, its earlier investors including SAIF Partners, Qiming Venture Partners and Innovation Works.
Zhihu then raised $100m in series D funding from Tencent, internet company Sogou, Qiming Venture Partners, Capital Today and Sinovation Ventures in 2017.
The company added $270m in a 2018 series E round featuring Tencent, insurer Sunshine, Capital Today, Advantech Capital and Oceanpine Capital at a reported $2.5bn valuation.
Kuaishou led Zhihu’s $434m series F round in August 2019, investing alongside Tencent, Baidu and Capital Today. The round valued it at nearly $3.5bn.
Tencent’s share of the company will be cut from 12.3% to 11.1% in the offering while Kuaishou is being diluted from 8.3% to 7.1%. Its other notable investors are Innovation Works (an 11.3% stake post-IPO), Qiming Venture Partners (9.7%), SAIF Partners (8%) and Capital Today (5.8%).
Credit Suisse Securities (USA), Goldman Sachs (Asia) and JP Morgan Securities are lead joint bookrunners for the IPO. China International Capital Corporation Hong Kong Securities, CMB International Capital, China Renaissance Securities (Hong Kong), CLSA, Haitong International Securities and Lighthouse Capital International are joint bookrunners.
The underwriters have 30 days to take up an option to buy up to 8.25 million additional ADSs, potentially lifting the size of the offering to almost $851m.
