April 2, 2019 / 5:46 AM / 2 months ago

Bilibili offering raises $824 million as China techs tap market after IPOs

HONG KONG (Reuters) - Chinese video platform Bilibili’s convertible bond sale and follow-on share offering raised $824 million, four people with direct knowledge of the matter said on Wednesday.

The move marks a return to the capital markets for Bilibili just over a year after it went public in New York. This year has already seen other U.S.-listed Chinese companies return to markets to raise additional funding, be it through convertible bonds or follow-on offerings, as they seek more growth capital.

Bilibili sold a $500 million seven-year convertible bond and 18 million shares at $18 each, a discount of about 0.3 percent to its closing price of $18.05 on Tuesday, the people said, declining to be named as they are not authorized to speak publicly about the deal.

The company had initially been seeking to sell only a $300 million convertible bond and 17.1 million shares, of which 6.53 million came from an existing shareholder, Qiming Venture Partners.

The offering’s size was increased because of “overwhelming demand” from investors, said a banker on the deal.

Bilibili did not immediately respond to a request for comment.

Chinese electric vehicle maker NIO, video streaming company iQIYI and e-commerce firm Pinduoduo, all 2018 IPOs, have come back to the market to raise funds.

“A lot of companies that went public last year didn’t raise as much money as they wanted to,” said Bruce Wu, co-head of equity capital markets for greater China at Citigroup, speaking about industry trends.

“It’s probably fair to assume that quite a number of them should revisit capital markets to see what kind of additional capital raises are possible for them, whether it’s through follow on offerings, through convertibles or a combination.”

Bilibili’s convertible bond was priced with issuer-friendly terms. The coupon is 1.375 percent, at the bottom of an indicative range of between 1.375 percent and 1.875 percent.

The conversion premium - the price at which buyers can convert their bond holding into the company’s shares - is 37.5 percent, at the top of a range of between 32.5 percent and 37.5 percent, the people said.

The $500 million convertible bond includes a $70 million greenshoe, or over-allotment option, two of the people said.

Convertible bonds are a cheaper funding avenue due to their lower coupons in exchange for giving the bondholder the option of converting the debt into shares at a set price in future.

Tech companies find them particularly attractive as normal debt is more expensive for them, especially if they are still unrated, like Bilibili.

The firm raised $483 million in its Nasdaq initial public offering (IPO) in March last year. Its shares have risen 84 percent since then.

Bilibili plans to use the proceeds from the offering to enrich content offerings, for research and development, potential strategic acquisitions, investments and alliances.

Bank of America Merrill Lynch, Citigroup, Credit Suisse, JPMorgan and Morgan Stanley are joint bookrunners for Bilibili’s offering.

Reporting by Julia Fioretti; Editing by Muralikumar Anantharaman

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