24/7 Wall St.

Chances are pretty good that you’ve heard about e-sports but have only a vague idea of what they are. Let’s just say that it’s more than getting a top score in Solitaire or Tetris. Its big business and on the edge of getting bigger.

China’s largest streaming platform from video games and e-sports crushed its initial public offering (IPO) Friday morning. Huya Inc. (NYSE: HUYA) sold 15 million American depositary shares (ADS) at $12 each to raise $180 million at a valuation of $2.4 billion. Since breaking out of the chute, shares added about 42% to trade at a high of $17.07 shortly after trading in the stock opened. Each ADS is equal to one share of common stock.

Huya was spun out of YY Inc. (NASDAQ: YY), a Guangzhou-based live streaming social media platform that posted fiscal year 2017 revenues of $1.78 billion and net income of $383 million. In March, YY closed a series B funding round with China’s Tencent Holdings that raised approximately $462 million. YY maintained control of Huya, although Tencent has a right to purchase shares totaling 50.1% of voting power in Huya between the second and third anniversaries of the closing date of the March investment.

The Huya gaming platform booked $336 million in fiscal year 2017 revenues and a net loss of $12.45 million. The company had 86.7 million average monthly active users (MAUs) in the fourth quarter of 2017, up 17.2% compared to the fourth quarter of 2016 and 83.4 million average MAUs in all of 2017, up 30% year over year. Huya’s mobile app MAUs rose nearly 75% year over year, and average daily time spent per mobile MAU rose from 91 minutes in 2016 to 98 minutes in 2017.

Underwriters for the IPO were Credit Suisse, Goldman Sachs (Asia), UBS Investment Bank and Needham. The underwriters were granted an overallotment option of 2.25 million ADSs.

In the noon hour Friday, the stock traded at $16.30, up nearly 36%, in a first-day range of $15.25 to $17.07.

24/7 Wall St.
Why This Segment of Technology Could Run the Rest of 2018