Kingsoft's Cloud Spinoff to Go Public in New York
The Chinese software giant's subsidiary has announced its intention to file for an IPO, offering ADS on one of the world's largest exchanges.
Kingsoft announced 'Proposed spin-off and Separate Listing of Kingsoft Cloud Holdings Limited' on December 22.
The cloud sector has been the second case in the pipeline since Kingsoft completed the listing of its office software business (Beijing Kingsoft Office Software) on the STAR market in November 2019.
As at the date of the announcement, Kingsoft Cloud is a non-wholly owned subsidiary of the Company. Following the completion of the Proposed Spin-off, it is expected that Kingsoft Cloud will cease to be a subsidiary of the Company.
If the proposed spin-off materialized, it will constitute a deemed disposal of the interest in a subsidiary of the Company under Listing Rules.
The revenues generated by cloud service has been expanding in the past 5 years. In 2014, the cloud service as a percentage of total revenue has increased from 4.36% in 2014 to 37.56% in 2018.
Kingsoft's third-quarter 2019 financial report also shows that the revenue generated from cloud service reached CNY 976.3 million, with a year-on-year increase of 62%, accounting for 48.5% of total revenue. The biggest growth driver is the increase in the number of mobile video users and the enterprise cloud service.
According to Kingsoft's Board, there are several reasons for and benefits from the proposed Spin-off:
a) The Proposed Spin-off would enable investors to better value the Company with its focus on the Retained Business;
b) The Proposed Spin-off could better reflect the value of Kingsoft Cloud Group on its own merits and increase its operational and financial transparency through which investors would be able to appraise and assess the performance and potential of Kingsoft Cloud Group separately and distinctly from those of the Retained Group, in turn providing better reward to the shareholders of both Kingsoft Cloud and the Company;
c) The Proposed Spin-off will enable the Company to fully focus on and deploy its funds towards the development of the Retained Business without needing to consider Kingsoft Cloud Group's funding requirements; and
d) The value of Kingsoft Cloud Group is expected to be enhanced through the Proposed Spin-off which will in turn benefit the Company as a controlling shareholder of Kingsoft Cloud.