Tencent-Backed Cross-Border Brokerage Futu Aims to Raise USD120 Million Via US IPO
Liao Shumin
DATE:  Feb 28 2019
/ SOURCE:  yicai
Tencent-Backed Cross-Border Brokerage Futu Aims to Raise USD120 Million Via US IPO Tencent-Backed Cross-Border Brokerage Futu Aims to Raise USD120 Million Via US IPO

(Yicai Global) Feb. 28 -- Futu Holdings, an owner of Tencent-backed investment platform that allows consumers to trade on the bourses of Hong Kong, the US and China's mainland, is aiming for a USD1.3 billion valuation in its initial public offering on the Nasdaq, expected to take place in a few days.

Futu intends to raise USD120 million while its diluted market value could reach USD1.3 billion based on the midpoint of the IPO price range, according to Nasdaq's website. The flotation is estimated to happen in the week starting March 4.

Futu plans to issue 10.9 million American Depository Shares, each priced between USD10 and USD12, according to the updated prospectus that the Hong Kong-based firm filed with the US Securities and Exchange Commission on Feb. 26. ADS means US dollar-denominated equity that foreign companies issue in the States.

Chinese traders are increasingly interested in foreign markets and Futu has a Chinese rival with dreams of a US IPO on the horizon. Up Fintech, also known as Tiger Brokers, filed its application a few days prior to Futu's, on Feb. 23. The unprofitable brokerage plans to raise slightly more, USD150 million, than its competitor. Its annual net loss was nearly USD10.1 million in 2018, based on non-generally accepted accounting principles.

Tencent Holdings, Futu's largest institutional investor, intends to subscribe up to USD30 million worth of shares in the IPO, which accounts for 25 percent of the estimated proceeds. Tencent already holds over 38 percent of Futu's equity.

The IPO hopeful added information about its 2018 business performance to the prospectus. The annual turnover reached HKD907 billion (USD115.6 billion). The trading platform made a profit of HKD100.3 million (USD12.8 million) over the first nine months of last year, while it turned a loss of HKD8.1 million (USD1 million) in the same period of 2017. Interests from securities margin trading and deposits have increased significantly, the firm said.

Futu has so far obtained five types of brokerage permits in Hong Kong, including those to trade stocks and futures, as well as offer wealth management services. It has applied for a virtual banking license in the special administrative region.

The US Financial Industry Regulatory Authority has given Futu the green light to operate brokerage and proprietary trading businesses in the US. The firm has also filed its application to provide liquidation services in the States.

Founded in 2011, Futu had 502,000 traders at the end of last year, while 56 million people had registered on the platform. The retention rate has been over 97 percent among its paying clientele since the beginning of 2017. The number of paying clients rose 66 percent annually in December.

Goldman Sachs Asia, UBS Investment Bank and Credit Suisse are the underwriters of the IPO deal.

Editor: Emmi Laine

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Keywords:   Futu Holdings,Tencent Holdings Ltd.,Cross-Border Investment