Xiaohongshu reportedly mulls IPO in Hong Kong instead of US

Chinese social media and eCommerce platform Xiaohongshu is reportedly planning to launch its initial public offering in Hong Kong, instead of the US, this year to raise at US$500 million. 

According to Bloomberg as it cited a source familiar with the matter, deliberations are still ongoing and the details, including fundraising size and timing, could change. A representative for Xiaohongshu said the company still has regular communication with stakeholders but they do not have any specific IPO plans at the moment. The company is also working with advisers and could file an application for a Hong Kong IPO as soon as this year. It could also raise as much as US$1 billion depending on the market. 

Xiaohongshu positions itself as a lifestyle platform that inspires people to discover and connect with a range of diverse lifestyles. It said it had reached over 300 million users on its platform in 2019 and it had more than 100 million active monthly users too. Backed by Tencent and Alibaba, Bloomberg said Xiaohongshu is one of several companies that have had to revisit their listing plans in the US after China set up new rules for firms going public overseas.

One of the requirements is that all companies holding data on more than one million users need to submit a cybersecurity review, which caused Xiaohongshu to reconsider its plan to launch IPO in the US. Bloomberg also said Xiaohongshu was seeking a valuation of about US$6 billion in a funding round last year. 

In June, ride-hailing company Didi Chuxing went to the US for IPO but it was hit with an anti-trust probe by China's market regulator, the State Administration for Market Regulation. According to multiple media reports, the regulator investigated whether Didi Chuxing engaged in any anti-competitive practice that "unfairly squeezed out" smaller rivals. In July, China asked Didi Chuxing to remove from app stores due to serious violations of Didi Global's collection and usage of personal information.

Multiple reports said Chinese cybersecurity watchdog the Cyberspace Administration of China (CAC) announced the ban on Sunday, just two days after the regulator said it was starting a cybersecurity review of the company. However, currents users who downloaded that app before Sunday can still continue to order rides and other services.

The authority said on Sunday that it ordered Didi Chuxing to rectify its problems following legal requirements and national standards, and take steps to protect the personal information of its users. On the same day, Didi Chuxing said it had halted new user registrations as of 3 July and was now working to rectify its app in accordance with regulatory requirements.

The CAC did not specify what it would look into, but the time of announcement came after Didi Chuxing's IPO and on 30 June and the Communist Party’s 100th anniversary celebrations in Beijing.

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