NetEase’s Cloud Village Shares Slip During First Day of Trading Amid Continued Regulatory Scrutiny

NetEase shelves Chinese IPO

Photo Credit: NetEase

NetEase has officially launched its over $400 million Cloud Village IPO, and the Chinese streaming service’s shares suffered a small valuation dip during their first day of trading.

Cloud Village shares (HKSE: 9899) were worth about $26.31 (HK$205) apiece when the market opened this morning, factoring based upon the current exchange rate. Less than one hour into trading, though, the stock’s per-share worth declined to $25.67 (HK$200). Shares hovered around the price point for the remainder of the day, briefly rebounding to $25.95 (HK$202.20) each before finishing at a low of $25.66 (HK$199.90).

The precise causes of Cloud Village stock’s relatively lackluster opening-day performance remain unclear. (Warner Music stock enjoyed a material valuation hike upon debuting last year, for instance, as did Universal Music stock in September of 2021, but Believe shares recorded a double-digit falloff out of the gate.)

However, it bears mentioning on this front that the IPO arrives amid far-reaching entertainment- and tech-industry scrutiny from the Chinese government. To be sure, NetEase was reportedly targeting a billion-dollar Cloud Village offering at the outset, before shelving the IPO and then settling for today’s comparatively small listing, in which Sony Music has an approximately $100 million stake.

Meanwhile, Tencent – a substantial portion of which belongs to Amsterdam-based Prosus – has been ordered by Beijing to seek approval before releasing any apps or updating existing offerings. And prior to the latter requirement, the conglomerate’s Tencent Music (NYSE: TME) division was made to give up all exclusive-music deals; TME yesterday hit an all-time low of $6.65 and has parted with almost 65 percent of its value on the year.

Keeping in mind the nixed exclusive-music agreements of Tencent Music, which operates China’s most popular music streaming services, NetEase CEO William Ding in an open letter today emphasized Cloud Village’s “obligation to support original music and independent artists.”

NetEase higher-ups forwarded the lengthy message to DMN, and Ding in the approximately 1,650-word-long document, acknowledging the rise of non-music “audio-based content,” predicted that Cloud Village will become “an audio-centric universe” down the line.

Perhaps the most interesting passage from the all-encompassing letter concerns Cloud Village’s community features and social-media functions.

“In the future,” the relevant text reads, “you will be leaving more creative footprints of your own. Each one of your creative inputs, small or big, will help us further enhance our community bond and strengthen that intimate connection between our villagers, making NetEase Cloud Music the most engaging, interactive community in music.”

Inversely, TikTok (known as Douyin in China) parent ByteDance is reportedly preparing to launch a music streaming service. Needless to say, it appears that Tencent Music will be unable to diversify and expand until regulators lift the aforementioned “indefinite” ban on releases and updates for the overarching Tencent.