After nearly two years of planning, Keep has finally completed its IPO, becoming the first Chinese internet startup to go public in Hong Kong in two years and also becoming the &#34;number one sports technology stock&#34; on the Hong Kong Stock Exchange.
On July 12th, Keep was listed on the Hong Kong Stock Exchange with an issue price of HKD 28.92, raising a total of approximately HKD 300 million. After deducting commissions and underwriting expenses, the net proceeds amounted to approximately HKD 192 million. Based on the first day's issue price, Keep's market value exceeded HKD 15.2 billion.
A total of 10,839,000 shares were offered by Keep, including 9,755,000 shares for international offering and 1,084,000 shares for public offering. The Hong Kong public offering portion was oversubscribed by approximately 3.08 times, while the international offering portion was oversubscribed by approximately 1.37 times.
In its prospectus, Keep stated that the funds raised this time will be used for research and development, fitness content development and diversification, brand promotion and marketing, general corporate purposes, and working capital needs. Among these, the largest proportion of investment will be allocated to research and development, accounting for approximately 35% of the net proceeds.
After the market opened, Keep rose by more than 4.7%, but the gains narrowed shortly after, and it briefly fell below the issue price. In the morning, it surged again.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a36553ae-f43c-417e-917e-41172e88cbf5.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Keep IPO" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a36553ae-f43c-417e-917e-41172e88cbf5.png"/>
It should be noted that Keep is the first Chinese internet platform company to be listed on the Hong Kong Stock Exchange after 2021.
At present, Keep's stock price performance may reflect the market's cautious attitude towards such startups.
In the past two years, Hong Kong-listed internet companies have generally experienced a downturn, with the Hang Seng Tech Index falling more than 60% from its peak in February 2021.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1c83bb40-afc4-4b35-a533-a6e4810280d5.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Hang Seng Tech Index" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1c83bb40-afc4-4b35-a533-a6e4810280d5.png"/>
Despite the adverse impact of the contracting external environment on company valuations, there are still a considerable number of Chinese internet platform companies preparing for listing after Keep.
The listing of Keep will also provide a reference for these companies and the entire venture capital market.
<h2>The Largest Fitness Platform</h2>
According to the prospectus, based on the number of monthly active users and the number of workouts completed in 2022, Keep is the largest fitness platform in China.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/dc6f5f3d-3d2a-4b3f-978e-d6809cd1adac.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Keep Monthly Active Users" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/dc6f5f3d-3d2a-4b3f-978e-d6809cd1adac.png"/>
From 2019 to 2022, Keep's average monthly active users increased from 21.8 million to 36.4 million, with a total of over 2.1 billion workouts completed. However, during the same period, Keep's average monthly member retention rates were 73.3%, 71.7%, and 65.3%, showing a downward trend overall.
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<h2>Increase in Membership Fee Revenue</h2>
Keep's revenue comes from online fitness content, self-operated sports products, and advertising. The proportion of revenue from online paid content is increasing.
In 2022, Keep's total revenue was 2.212 billion yuan, with self-owned brand sports products accounting for more than 50% of the revenue, reaching 1.137 billion yuan; revenue from online paid content such as membership subscriptions was 894 million yuan, accounting for 40.4% of the previous year, an increase from 34.4%; advertising and other business revenue accounted for a reduced proportion of 8.2%.
In 2022, Keep's membership penetration rate was 10%, a further increase from 3.5% in 2019.
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In 2022, Keep's gross profit was approximately 900 million yuan, a 33% increase from the previous year. Among them, the gross profit margin of membership subscription services was the highest, reaching 21.9%, while the gross profit margin of self-owned brand sports products further declined to 14.5%. The gross profit margin of advertising was only 4.3%<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/78e7c637-f945-49d7-97b9-994fc87dfd02.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/78e7c637-f945-49d7-97b9-994fc87dfd02.png"/>
In terms of profit, Keep had a net loss of 2.9 billion yuan in 2022. Keep stated in its prospectus that the expanded loss was due to a decrease in the fair value of preferred shares, among other reasons.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a709900f-334f-4341-b682-9f1d5d152492.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a709900f-334f-4341-b682-9f1d5d152492.png"/>
<h2>Cost Reduction in Marketing</h2>
In terms of cost, from 2021 to 2022, Keep's marketing expenses decreased from 59% to 29.2%, while research and development expenses increased from 22.0% to 24.3%.
Keep stated that the decrease in marketing expenses in 2022 was mainly due to improved marketing efficiency, while the increase in research and development expenses was a result of expanding the research and development team and continuous investment to strengthen technological capabilities.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3a5b3986-ee5a-4688-b71c-aa09969ef6a6.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3a5b3986-ee5a-4688-b71c-aa09969ef6a6.png"/>
<h2>Founder Remains the Largest Shareholder</h2>
According to the prospectus, prior to the IPO, Keep's founder, Wang Ning, held a 16.97% stake, making him the largest single shareholder of the company. GGV Capital held a 14.73% stake, and SoftBank Vision Fund held a 9.48% stake.
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In the current market where most people are adopting a wait-and-see approach, what kind of demonstration will Keep's listing bring to those internet companies that are also planning to go public in Hong Kong?

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KEEP

For the past two years, China's Internet industry has made its debut on the Hong Kong Stock Exchange! "The leading stock in sports technology," Keep, experienced a significant surge on its first day of trading.