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Baidu aims to raise up to HK$28 billion from share sale

Baidu shares had a volatile week after it announced details of its planned Hong Kong listing but was also fined by China’s authorities.

  • Baidu, Inc (Nasdaq: BIDU) share price rises 1% week-on-week to US$264.25 per share
  • It hopes to raise up to HK$28 billion through a secondary listing in Hong Kong
  • The internet giant will set the final offer price for the deal by 17 March 2021
  • However, news of Beijing increasing the heat on tech players weighed on sentiment
  • Trade BIDU shares with an IG account

Will Baidu’s shares jump to US$344.46?

Shares of Baidu slipped 3% day-on-day to close at US$264.25 last Friday (12 March 2021) in New York, although they were still up about 1% on the week.

The US-listed shares of the Chinese search engine, entertainment and artificial intelligence (AI) behemoth got a recent boost from its planned secondary listing in Hong Kong, although increased anti-competition scrutiny in China tempered the optimism.

Out of 41 analysts, 32 recommended ‘buy’ on Baidu’s US shares, six had ‘hold’ calls, and three said to ‘sell’. Their average 12-month target price was US$344.46, Bloomberg data showed.

Morningstar has downgraded Baidu to ‘sell’, with a US$221 target, while Credit Suisse recommended ‘outperform’ with a US$407 target.

Second listing in Hong Kong

The search engine leader on Friday kicked off the retail tranche of its Hong Kong public offering. Baidu is the latest US-traded mainland China company seeking a secondary listing in the city.

It plans to sell 95 million shares at a maximum price of HK$295 per share to retail shareholders, to raise as much as HK$28 billion, Baidu announced last Thursday.

That offer price represents premiums of 19%, 8.3% and 11.6% to the closing prices of Baidu’s Nasdaq-listed stock last Wednesday, Thursday and Friday respectively.

Each Baidu American depositary receipt (ADR) listed in New York will be equivalent to eight of its Hong Kong shares, Reuters reported.

Baidu will set the final offer price before the US market opens this Wednesday (17 March 2021). Its shares in Hong Kong will begin trading on 23 March 2021.

The group plans to use half of the proceeds to invest in technology and develop its AI. Some 40% of the fresh capital will be spent on growing its mobile ecosystem; the rest will go into general corporate purposes.

Increased antitrust scrutiny

Beijing authorities have dialled up its crackdown on the country’s sprawling, once free-wheeling technology industry in recent months.

On Friday, the regulator slapped symbolic fines on 12 more companies, including Baidu and other tech giants like Tencent, ByteDance and Didi Chuxing, for allegedly flouting anti-monopoly rules.

Baidu must pay RMB500,000 in administrative penalties for acquiring consumer electronics maker Ainemo under the radar in 2014. That is the maximum amount under current rules.

The latest blizzard of fines sends a message that China’s economy ‘and everything within it must comply with the state’s director’, said Alex Capri, senior fellow at the National University of Singapore. Heavy-handed rules could limit the ability of tech giants to make acquisitions to gobble up market share and influence, he added.

How to trade shares with IG

Are you feeling bullish or bearish on Baidu's stocks?

Either way you can buy (long) or sell (short) the asset using IG's industry-leading trading platform, in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Baidu Inc> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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