China’s Q&A Site Zhihu Drops After IPO at Bottom of Range

Bookmark

Mar 27 2021, 12:00 AMMar 27 2021, 2:00 AMMarch 27 2021, 12:00 AMMarch 27 2021, 2:00 AM

(Bloomberg) -- China’s answer to online Q&A service Quora, Zhihu Inc., fell 11% in its U.S. trading debut after a $522.5 million initial public offering at the bottom of a marketed range.

Zhihu’s American depositary shares, which sold for $9.50 in the IPO, closed at $8.50 in New York trading Friday. The company sold 55 million shares after marketing them for $9.50 to $11.50 each.

The pricing comes as U.S.-listed Chinese firms tumbled after the Securities and Exchange Commission said it would begin to implement a law forcing accounting firms to let U.S. regulators review financial audits of overseas companies. That could lead to Chinese companies being delisted if they refused.

Over the past year Chinese companies have continued flocking to American exchanges for capital even as relations between Beijing and Washington have deteriorated. Zhihu’s IPO was the third-largest by a Chinese company on a U.S. exchange this year, after e-cigarette maker RLX Technology Inc. and software firm Tuya Inc. raised $1.6 billion and $915 million, respectively.

Zhihu is the largest Q&A online community in China by both average mobile monthly active users and revenue, according to its prospectus. Its average monthly active users numbered 75.7 million in the last quarter of 2020, a 33% increase from a year earlier.

The company had a net loss of 517.6 million yuan ($79.1 million) last year on revenue of 1.4 billion yuan. It plans to use the proceeds from the offering for product and service development, marketing and user growth, research and development as well as general corporate purposes.

Zhihu is also doing a private placement alongside the IPO in which investors including affiliates of Alibaba Group Holding Ltd., JD.com Inc. and Tencent Holdings Ltd. have agreed to buy $250 million of shares.

Credit Suisse Group AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are leading the IPO. The shares are trading on the New York Stock Exchange under the symbol ZH.