Douyu shares tepid on Nasdaq debut

Douyu International Holdings Ltd, China's leading video game livestreaming platform, fizzled after its trading debut on the Nasdaq. It is the largest listing by a Chinese company in the United States this year.

Trading in Douyu shares got off to a weak start on Wednesday when it opened at $11.02, down 4.2 percent from its initial public offering price of $11.5 per share. It hit a session low of $11 before rallying to the day's high of $11.54.

The stock ended its first trading day at the IPO offer price.

"In the past five years, we've grasped the opportunities of the development of the livestreaming sector. Now we have become the largest gaming-centric livestreaming platform in China," Chen Shaojie, the founder and CEO of Douyu, said at the opening bell ceremony.

Chen added: "Buoyed by more than 6.5 million livestreaming hosts and 280 million registered users, we will continue to expand the business and gain new momentum in the market."

Douyu was valued at $3.73 billion.

Backed by Chinese social media and gaming titan Tencent Holdings Ltd, Douyu said it plans to use more than 60 percent of net proceeds from the offering to focus on offering premium esports content, expand the content genre, research and development of technologies, and work on big data analytics. The rest of the funds will be used to support marketing activities, working capital, and for potential acquisitions, investment and alliances.

In the first three months this year, Douyu reported 1.49 billion yuan ($216.65 million) in revenues, up sharply from 666.5 million yuan in the same period in 2018. The firm posted a profit of 18.2 million yuan for the first quarter.

Douyu said livestreaming is its main source of revenue, generating nearly 91 percent of the total in the first quarter. The revenues are gained mainly from sales of virtual gifts from viewers of streamed content.

The enthusiasm for the games and interaction among gamers has created the world's largest gaming livestreaming market, a report by internet consultancy iResearch said.

Revenues of Chinese game livestreaming platforms are expected to hit 19.2 billion yuan this year, up 35.6 percent year-on-year. Those revenues are set to register a compound annual growth rate of 24.7 percent from 2018 to 2023, reaching 39.8 billion yuan in 2023.

However, the best days for livestreaming channels may have passed as Chinese authorities have stepped up the regulation of livestreaming services and gaming.

Zhang Xintian, an analyst at iResearch, noted a series of livestreaming platforms have ended their services since the middle of 2017.

"As the industry now enters a mature period of steady growth, small-and medium-sized livestreaming platforms are marching to a rocky future," Zhang noted.

China is the world's largest gaming market by revenue. However, for the first time since 2015, the United States will overtake China to become the biggest gaming market by revenues globally with $36.9 billion this year, a recent report said.

China's gaming industry has also seen revenue growth of 5.3 percent year-on-year in 2018, the slowest level in a decade.

With popular short video apps like Kuaishou and Douyin dominating netizens' smartphone screens, the livestreaming industry is facing a shake-up in the market.

Zhang said that with people having limited time for entertainment, new entertainment forms like short videos will inevitably have an impact on existing services.

"As short video apps have a lower threshold than livestreaming service providers, they will easily occupy peoples' fragmented time. Livestreaming usually offers deep immersive experiences," Zhang added. "I believe the market will grow steadily, (but) it will leave less room for changes in the future."