NetEase is latest China tech company to plan Hong Kong listing amid U.S. push for scrutiny 


By Joanne Chiu

Mobile-gaming group NetEase Inc. has begun taking investor orders for a multibillion-dollar Hong Kong share sale, as momentum builds for U.S.-listed Chinese companies to obtain secondary listings closer to home.

The Nasdaq-listed group's secondary offering in Hong Kong comes after a roughly $13 billion Hong Kong debut by Alibaba Group Holding Ltd. last year, and is likely to be followed by another stock sale in the city by Chinese e-commerce group JD.com Inc.

NetEase and JD.com are pursuing Hong Kong listings as U.S. lawmakers push for greater financial scrutiny of Chinese companies who trade on American exchanges.

NetEase on Monday said it is selling 171.48 million new shares ahead of a trading debut in Hong Kong on June 11 under the stock code 9999.HK. Based on Friday's closing price for its American depositary receipts, it could raise about $2.6 billion, a term sheet from one of the banks handling the deal showed.

It will set the final offer price on Friday based on the last closing price for its U.S. securities and on market demand.

The online-gaming company, a rival to Tencent Holdings Ltd., set a maximum offer price for its shares of HK$126 each ($16.25) for the small part of the offering reserved for individual investors. The final offer price for the international tranche, which accounts for most of the total stock sale, could be higher.

China International Capital Corp., Credit Suisse and JPMorgan are the deal's joint sponsors, or the most senior banks on the deal. The underwriters would have the option to increase the deal's size by up to 15%, after the listing, depending on market conditions. That would raise the deal size to $3 billion, the term sheet showed.

NetEase joined the Nasdaq in 2000. Its American depositary receipts have risen nearly 25% this year, giving it a market capitalization of more than $49 billion as of Friday. Each depositary receipt is equivalent to 25 ordinary shares.

This is a sensitive time for U.S.-listed Chinese companies. The U.S. Senate passed a bill in May that could kick Chinese companies off U.S. stock exchanges unless their audits are inspected by the U.S. Securities and Exchange Commission's audit-watchdog arm.

Hong Kong's stock exchange in 2018 revamped its rules to court more listings from technology and biotechnology groups.

"I believe that returning to a market that is closer to our roots will further fuel our passion in our business and our users," William Ding, NetEase's founder and chief executive, said in a letter to investors that was included in the group's listing document.

NetEase said it plans to spend some of the proceeds on expanding its online-game offerings in overseas markets including Japan, the U.S., Europe and Southeast Asia, and some on technology.

In the January-to-March period, NetEase's net revenue rose 18.3% from a year earlier, to $2.4 billion, while net income from continuing operations increased 49% to $501.5 million.

Write to Joanne Chiu at joanne.chiu@wsj.com