Xunlei to restart its IPO process in US
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E-mail China Daily, June 12, 2014
Xunlei, an Internet platform that offers digital content acceleration and online video services in China, is likely to restart work on its proposed initial public offering in the United States next month, Tencent.com said on Wednesday.
Xunlei Corp had in a recent regulatory filing said it plans to raise $100 million from an IPO in the US capital markets.
In 2011, Xunlei had drafted plans to raise $114 million on the Nasdaq with a $1 billion market cap but later shelved it due to the uncertain market conditions.
The US capital market is more conducive to Chinese Internet companies, said analysts, adding that Xunlei's plan to restart IPO proceedings has also been necessitated by the tough competition it is facing in China's video market.
With an increasing number of China's Internet companies going public in the US, such as Weibo Corp, JD.com and Jumei.com, US investors are seen to be extremely receptive to young, up-and-coming Chinese Internet companies.
Xunlei is facing a tough challenge from peers such as Sohu and Leshi, and has played second fiddle to them in terms of revenue and subscribers for streaming services.
Further, Xunlei agreed to implement a comprehensive system to protect Motion Picture Association of America members' copyrighted works from unauthorized downloading earlier this month.
The action may hit subscribers' loyalty, as many Chinese viewers are interested in US TV series, sources said.
"Xunlei is also tweaking its business model to comply with government policies as it has been accused of violating copyrights," said Pang Yiming, an analyst with research company Analysys International.
Profits at Xunlei jumped to $10.7 million in 2013 from $500,000 in 2012. In the first quarter of 2014, the company reported net profit of $400,000 on increased revenue of $41.2 million.
Xunlei's user base has been regarded as its major advantage. Its revenue from subscriptions accounted for 60.3 percent of total revenues in the first quarter of this year.
The company's subscriber base grew to 5.17 million by the end of March from 4 million at the end of 2012.
All of these factors are expected to provide the right cushion for the company's IPO, analysts said.
"The online video-on-demand industry in China is more or less settled and not attractive for new players. Companies like Xunlei will have to make huge video copyright payments to cope with users' long-developed habits," said Peng Kan, research and development director of Legend Media, a Beijing-based consultancy.
"Therefore, the effect of Xunlei's IPO on the sector and its players would be quite limited," added Peng.
Other dominant players in the sector include Youku Tudou, iQiyi and Tencent Video.
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