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Tencent-backed Online Broker Futu Files for $300 Million IPO in New York

Futu, through its digital platform, Futu NiuNiu, focuses on attracting new investors and young millennials who are curious about buying stocks.​

Selina Cheng
    Dec 28, 2018 5:14 PM  PT
Tencent-backed Online Broker Futu Files for $300 Million IPO in New York

Futu Securities International, an online brokerage company backed by Tencent Holdings Ltd. (HKEX: 0700), filed today for a $300 million initial public offering with the U.S. Securities and Exchange Commission under the symbol "FHL." 

Futu Securities originally planned to go public in Hong Kong, but later picked New York for a quicker and quieter listing process. The Hong Kong-based company filed with the SEC confidentially on Oct. 19. 

"For Futu, it makes more sense to list in the U.S. which has better comparable peers and allows confidential filings. It doesn't have to disclose key business and financial information to the market and rivals at the beginning," a source told Reuters earlier this month. 

In addition, most of new listings on the Hong Kong market have suffered big losses over the past several months, which partially drove management to pick New York as the preferred choice. Tencent-backed Meituan Dianping (HKEX: 3690) listed in Hong Kong in September, but has lost more than 33 percent of its market value over the past three months. Shares of Xiaomi Corp. (HKEX: 1810) have dropped more than 25 percent since its IPO.

Founded in 2012 in Hong Kong, Futu aims to provide online stock trading services with low fees and live feeds. Unlike other platforms, Futu allows mainland Chinese investors to trade stocks in Hong Kong and the United States. It is reported that Futu Securities was among the top five brokerage companies in Hong Kong with more than 80 percent of users from mainland China. 

The company said that as of Sept. 30 it had an attractive and rapidly growing user base of 5.3 million, over 457,000 registered clients, and for the six months ended June 30, Futu brokered $61.1 billion in client trades, underlying a brokerage revenue base that ranked fourth among Hong Kong online retail brokers, according to Oliver Wyman. 

Futu, through its digital platform, Futu NiuNiu, focuses on attracting new investors and young millennials who are curious about buying stocks. Its client base is on average 34 years old, and approximately 45 percent of them work in the iinternet, information technology, or financial services industries.

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The company's revenue reached $39.8 million in 2017, representing a 258 percent increase from a year ago. Net income for the nine months ended Sept. 30 was $12.8 million, compared with a net loss of $4.88 million for the same period in 2017. As of December 2018, the number of Futu's users exceeded 5 million, and its monthly transaction volume was more than 70 billion yuan. 

The company raised $145 million in its most recent funding round from Tencent, Sequoia Capital, and Matrix Partners China last June. Goldman Sachs (Asia), UBS Investment Bank, and Credit Suisse are the joint bookrunners on the current IPO.

As well as a main investor of Futu, Tencent is also a key supporter of the company. Leaf Hua Li, founder and chief executive officer of Futu was Tencent's eighteenth employee. He joined Tencent in 2000 and was an early and key research and development participant in Tencent QQ and the founder of Tencent Video. Futu's chief technology officer, PPchen Weihua Chen, was also from Tencent. He was the former head of Tencent QQ's back-end services and led multiple system restructuring projects of Tencent QQ with hundreds of millions of simultaneous online users, according to the prospectus.

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