Chinese tech giant NetEase to spin off its music streaming business Cloud Village in a $500 million Hong Kong IPO

NetEase announced early Tuesday morning that it plans to spin off its music streaming business Cloud Village in a $500 million initial public offering (IPO) in the Hong Kong stock exchange. The announcement came as the Chinese tech giant attempted to revive the IPO, after shelving the plan in August but was reportedly delayed due to volatile market conditions. NetEase said the IPO is now back on track.

As part of the IPO of which the final price has still not been set, Cloud Village will offer 16 million shares at a price between 190 Hong Kong dollars and 220 Hong Kong dollars. Cloud Village is expected to raise about 4.04 billion Hong Kong dollars ($519.6 million), excluding fees and other expenses related to the IPO. Following the IPO, NetEase would retain at least 50 percent of the voting rights.

Cloud Village is currently the music streaming arm of NetEase. The company says it has 185 million monthly active users. Currently, most of Cloud Village’s revenue comes mainly from subscriptions, advertising, and when users buy virtual items on its platforms.

For the nine months ended September 30, Cloud Village’s revenue rose 51.5% year-on-year to 5.1 billion yuan ($799.6 million). However, the company continues to suffer heavy losses as it competes for market share against China’s behemoth, Tencent’s music streaming business.

Meanwhile, NetEase has been shedding some of its subsidiaries in recent years. We covered NetEase in 2019 after the tech giant sold its e-commerce business Kaola to Alibaba for $2 billion. As part of the acquisition, Kaola continued to operate independently under its current brand and Alvin Liu, the import and export general manager of Tmall, will serve as Kaola’s new chief executive officer.

“With Kaola, we will further elevate import services and the experience for Chinese consumers through synergies across the Alibaba ecosystem,” Daniel Zhang, chief executive of Alibaba Group, said in the statement at the time.

Founded in 1997 by William Ding, NetEase offers online game services, advertising services, and wireless value-added services in China. Through its subsidiaries, NetEase engages in online games, internet portals, e-mail, and wireless value-added service businesses in China. It operates through three segments: online game services; advertising services; and e-mail and wireless value-added services. Kaola is NetEase’s self-operated cross-border e-commerce platform, online video broadcasting services, and insurance products.