LVC-backed Cloud Village Lists on the Hong Kong Stock Exchange
On December 2, 2021, Loyal Valley Capital (LVC)’s portfolio company, Cloud Village (referred to as “the Company”), a leading online music streaming platform, successfully listed on the main board of the Hong Kong Stock Exchange under the stock code 9899.HK. As NetEase’s music streaming unit, Cloud Village has priced its IPO at HK$205 per share, with a total of 16 million shares issued.
The Company has experienced robust growth after LVC’s investment in 2018. Its revenue increased by 345% from RMB 1.1 billion in 2018 to RMB 4.9 billion in 2020, while the gross margin increased significantly and reversed to a positive 0.4% by the first half of 2021. According to the Prospectus, the monthly active users of online music services have reached 184 million in the third quarter of 2021, of which the number of paid members is 27.5 million, representing a CAGR of 95% from 2018 to 2020.
With the accelerated pace of development, the Company’s competitive advantages continued to emerge:
1.User group is younger and more educated: 89% of the users are born in the 90s, with over 60% of the users located in tier 1 and tier 2 cities;
2.Iconic playlists and personalized recommendation functions and better community atmosphere: Customized playlists and recommendation functions are major driving forces that attract and retain audiences. According to the Prospectus, the platform had almost 2.8 billion user-generated playlists and of every 10 music streams consumed on the platform, 2.8 came through the recommendation algorithm; over 48% of the users browse the comments section related to the songs and many comments became big hits not only on the platform itself, but went viral all over the internet, indicating a highly interactive user community;
3.Favorable industrial conditions and unique indie musician community help to build its own differentiated advantages: The Company has successively signed copyright agreements with three major record companies; A support system targeting indie musician is more diversified and has attracted more than 300 thousand musicians to register; The music library created by indie musicians contributes to 47% of the total number of plays on the platform.
LVC committed a strategic investment in 2018 and we stand firm that the Company has the ability to continuously grow and improve the community from then till now. ”Loyal Valley's investment focused on consumption driven by young generation and we captured the competitive differentiation of Cloud Village through deep thematic research,” said Ms. Lisa Ye, Partner of LVC, “After our investment in 2018, LVC has continuously offered various business cooperation within and beyond portfolio companies and provided research reference for the Company's strategic development. Cloud Village has established a large sticky user community within the 90s and 00s generation with interesting interactive content and social feature. The personalized recommendation feature based on AI technology further strengthens customer stickiness. The Company also established a long-term competitive advantage by ensuring a steady stream of high-quality music from indie musicians and building a healthy music creation and distribution ecosystem. You can always enjoy the accompany, explore all the possibilities, and be inspired and intrigued by the Cloud.”
LVC is proud to partner with Cloud Village and looking forward to more high-quality music content brought by the Company. LVC will also continue to support the Company in the journey of creating a better music experience for the whole society.