Most Kwai Chung, operator of the online satirical media platform TVMost and magazine 100Most, is set for a record-breaking initial public offering in Hong Kong.
As of Tuesday, market sources said margin financing for subscription of the company’s IPO shares has reached HK$27.9 billion. That’s 3,449 times the HK$8.1 million it expects to raise from the retail portion of its share offering.
The media and advertising solutions company on Friday said it expects to raise up to HK$81 million from the Hong Kong IPO, of which only 10 percent, or HK$8.1 million, was for Hong Kong investors’ subscription.
The tremendous market response demonstrates the overwhelming desire of investors in the territory to reap quick profits from newly listed firms as they expect the company’s share price to rise sharply once it starts trading because of its relatively small size.
The company is offering 67.5 million shares at an indicative price range of HK$1.0 to HK$1.2 apiece, according to a prospectus filed with the stock exchange.
Most Kwai Chung, established by three former radio program hosts, may not be a household name, but its video service and magazine are well-known across the territory, especially among youngsters, for their satirical comedies and parodies.
The company’s net profit slumped 84 percent to HK$5.2 million in the eight months to Nov. 30, as revenue fell 27.3 percent to HK$55.3 million. The decline in profit was partly attributed to higher administrative costs, which included listing expenses.
Most Kwai Chung has a clear business model. It’s an advertising company with its own designers, artists and other creative staff as well as distribution channels (both online and print).
According to its IPO prospectus, its operations are generally project-based. And since the company does “not enter into long-term agreements with most of our customers”, its revenue “may fluctuate”, depending on the number of projects it is able to secure. It also admitted “limited visibility” as to its future revenue streams.
The company’s digital media services, print media services, and other media services contributed 91.3, 8.3 and 0.4 percent respectively to its revenue.
Its presence and influence in the media industry are mainly attributed to its strategic alliances and acquisitions, sales and marketing strategies, as well as event-organizing activities.
Most Kwai Chung, in fact, is starting to diversify its revenue stream by organizing stage shows featuring its own artists.
The latest presentation is “East Sing Superpower Save Hong Kong”, which is a stand-up comedy show by Most TV artist East Sing.
Most Kwai Chung’s decision to go public can be interpreted as an effort to raise money for expansion. According to its prospectus, the company plans to use the IPO proceeds for potential acquisitions as well as for office equipment and other capital expenditures.
That said, the company has no real immediate need for funding, and therefore, to go public. The HK$81 million it plans to raise may not even be enough to buy a luxury flat in Hong Kong.
Retail investors, of course, are most probably just after a quick profit from the IPO, but in the long term, the company may have what it takes not only to survive but to thrive.
Most Kwai Chung is composed of young and highly talented individuals, who have a track record of delivering outstanding digital advertising campaign on the internet as well as creating high-quality content for books and magazines.
As a small enterprise, the company should focus on its core competence of artistic creation rather than business expansion. That is one great way for Most Kwai Chung to reward its investors.
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