Follow Hong Kong Investment Immigration and follow Hong Kong Life: The boom in the gaming industry has spread to the Hong Kong stock market. Within just one month, several gaming companies, including Forgame, IGG, and Boyaa Interactive, have successfully launched their initial public offerings (IPOs) in Hong Kong. Market reports indicate that multiple online gaming companies, including Snail Games, are also interested in listing in Hong Kong, sparking a minor "gaming craze" in the Hong Kong market.
It is actually not easy for gaming companies to go public
According to statistics from Zero2IPO Group, from the time China Mobile Games & Entertainment Group (CMGE) landed on NASDAQ via "introduction" in September 2012 to Forgame's listing on the Hong Kong Stock Exchange in October this year, a full year passed without a single domestic gaming company successfully going public. Among the 1,249 companies that have gone public since 2009, only five are online gaming companies: Shanda Games, Changyou, Taomee, Zeus Interactive, and Ourpalm. The first three listed in the United States, while the latter two listed on the Shenzhen ChiNext board.
A venture capital professional who previously participated in investing in the online game development platform and operator Zeus Interactive told reporters that it is not easy for domestic gaming companies to go public. For mobile gaming companies, the decision to focus on overseas listings now is based on several considerations: First, the domestic IPO market is suspended. Even if it were to reopen, mobile gaming companies would struggle to meet the current requirement of three consecutive years of profitability, as the earnings of such companies are uncertain and difficult to sustain for growth. Second, the industry characteristics of gaming companies are controversial; by comparison, traditional industries have a higher probability of listing domestically. Third, after successfully raising funds overseas, gaming companies can quickly capture market share and, with sufficient capital, acquire related companies, which facilitates the expansion of diversified platforms, the construction of multiple development teams, and the maintenance of the company's creativity.
Investment banking professionals also noted that previously, the only options for mainland gaming companies were to list on the A-share market, list in the United States, or be acquired. However, with the suspension of the domestic IPO market and the fact that U.S. regulators began strengthening audits of mainland Chinese companies this year—imposing additional requirements for accounting and auditing—raising funds in the Hong Kong market is relatively more familiar, carries lower risk, and offers a higher probability of a successful issuance, thus opening a new channel for gaming companies.
Mobile gaming concepts are highly sought after in Hong Kong
Forgame debuted on the Hong Kong Stock Exchange on October 3, surging 32.25% on its first day and closing at HK$67.5, making it the new stock with the largest first-day gain on the Hong Kong Stock Exchange this year. Boyaa Interactive's public offering in Hong Kong was oversubscribed by 832 times, freezing HK$86.8 billion in capital and becoming this year's "capital freezing king" for new stocks in Hong Kong. Goldman Sachs expects the mobile gaming industry to have a compound growth rate of about 50% over the next three years, though there will be pressure on valuations.
Feng Shinuan, Director of Asset Management at BOCI International, stated that mobile gaming concepts are currently accepted by Hong Kong investors for several reasons: First, mobile gaming-related concept stocks in the Hong Kong market, such as Kingsoft and Tencent, have performed well this year, and the industry's future prospects are promising. Second, the capital frozen by Boyaa Interactive hit a new high for the year, reflecting high investor enthusiasm. The key to the stock's appeal to investors is its relatively small market capitalization, which requires less liquidity to drive up the share price, making it highly attractive in terms of operation. Third, from a timing perspective, as the year-end approaches, there are fewer investment highlights in the market, and large-cap and blue-chip stocks are less attractive. Coupled with the reasonable pricing of mobile gaming concept stocks, they are quite attractive to investors.
Some foreign fund managers have stated that there is significant risk in investing in the mobile gaming industry at present because game rankings are influenced by many factors. The success and profitability of one game do not mean that all developed games can be sustained; profits are difficult to calculate, and the chances of successful investment are very low.