Beijing and ByteDance kill video apps star

The Kuaishou video streaming app is pictured on a mobile phone in this illustrative photo taken on January 25, 2018. REUTERS / Florence Lo / Illustration – RC1535EB19D0

HONG KONG, Aug. 24 (Reuters Breakingviews) – If something sounds too good to be true, it probably is. Chinese firm Kuaishou Technology (1024.HK) lost nearly $ 190 billion in market value from a peak reached shortly after its IPO in February. Its adjusted net loss is expected to reach $ 2.8 billion this year, analysts at Morgan Stanley believe, as it grapples with regulators and its biggest rival ByteDance. Barring a turnaround, it could be the shortest flash in China’s tech sector.

Kuaishou was the talk of the Hong Kong Stock Exchange six months ago. The viral video app’s initial public offering broke records, attracting orders from mom and pop traders equivalent to 1,200 times the number of shares on offer. The stock almost tripled on its first day of trading; As of mid-February, the unprofitable company had a market cap of over $ 220 billion, more than its video streaming counterparts Bilibili (9626.HK) and Hello Group (MOMO.O) combined.

How far the powerful have fallen. Today, the company is worth $ 37 billion, thanks in large part to a regulatory storm that trapped internet titans from Alibaba (9988.HK) to Tencent (0700.HK), and caused a massive market sale. Watchdogs last week unveiled other draft rules targeting the live streaming industry, prohibiting anyone under the age of 16 from marketing products, as well as guidelines for ‘s web influencers. ‘dress appropriately’ and speak Mandarin. A separate data privacy law will likely prevent companies from collecting user information or using recommendation algorithms. State media slam “low-brow content”.

All of this bodes ill for Kuaishou, which has turned to e-commerce and advertising to monetize its vast user base. And Beijing may not be the biggest problem. In the second quarter, monthly and daily active users on Kuaishou’s top apps declined slightly from the previous three months, Morgan Stanley analysts said, while ByteDance’s competing Douyin app rose. The bank estimates that Kuaishou must have spent $ 1.8 billion on sales and marketing expenses in the quarter and increased its full-year adjusted net loss forecast by more than a third.

Analysts’ average price target fell from over HK $ 400 per share to around HK $ 250 today, according to Refinitiv. The low is at HK $ 75 – where the stock is currently trading. Kuaishou, who must keep spending to fend off ByteDance, quickly sinks into obscurity.

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– Chinese video streaming app Kuaishou Technology will release financial results for the three months through the end of June on August 25.

– The company is expected to record an adjusted net loss, excluding stock compensation and other exceptionals, of 4.8 billion yuan ($ 739 million) on sales of 19 billion yuan for the period, analysts estimate by Morgan Stanley. The adjusted net loss for the whole year is expected to be 18 billion yuan.

– By the way, China’s Ministry of Commerce on August 18 released detailed guidelines for the live streaming market, including requirements that hosts speak Mandarin and dress appropriately when marketing products. in line.

Editing by Pete Sweeney and Katrina Hamlin

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