NetEase plans to raise $1bn by floating its Could Village subsidiary in Hong Kong

By Emmanuel Legrand

China's online gaming and music giant NetEase  announced on May 26 plans to list its 62.46%-owned Cloud Village subsidiary in the Hong Kong Stock Exchange. The company is looking to raise $1bn in the process.

  Upon completion of the proposed spin-off, NetEase will retain "not less than 50% of voting rights of Cloud Village and therefore Cloud Village will remain as a subsidiary of the Company," according to a statement from the company. It added that the listing "would enable investors to better value the Company with its focus on the NetEase Group’s businesses."

  Cloud Village was incorporated in the Cayman Islands on 2 February 2016, and is the umbrella company for music streaming platform NetEase Cloud Music, which has been operating on a stand-alone basis by Cloud Village since October 2016. NetEase Cloud Music had about 180 million monthly active users at the end of 2020.

Rapid business expansion

  "Cloud Village's business is expected to undergo relatively rapid business expansion and would be appealing to an investor base that focuses on high growth opportunities in the music streaming business, different from the relatively more diverse business model of NetEase's operations," said the company in a stock exchange filing. 

  Following the completion of the Proposed Spin-off, the NetEase Group "will continue to carry out its existing principal business, being internet technology," said the company.

  Cloud Village also operates other businesses including online streaming and advertising through its platforms. 

Growth in music streaming revenues

  Meanwhile, NetEase announced its financial results for the first quarter ended March 31, 2021 with revenues up 20.2% year-on-year to RMB20.5 billion ($3.1bn).

  NetEase's 'Innovative businesses and others' division,  which includes NetEase Cloud Music, had net revenues of RMB4.2bn ($640.4bn) in Q1 2021, up 39.7% on the same period of 2020. Online game services net revenues were RMB15.0bn ($2.3bn), up 10.8% compared with the first quarter of 2020. The company's gross profit was RMB11.1bn ($1.7bn), up 17.9% y-o-y.