Robin Li Yanhong, co-founder and CEO of Baidu in Beijing, China, in October 2018.
Visual China Group | Getty Images
GUANGZHOU, China – Baidu’s shares rose just under 1% at the opening of the company in Hong Kong, Tuesday.
The Chinese tech giant, which is already listed in the United States, raised $ 3.1 billion on Hong Kong’s secondary listing. The stock reduced these gains during morning trading.
Unlike initial public offerings, secondary listings may not be received with massive increases on the first day, since the company’s shares are already being traded on another exchange.
The Hong Kong listing is a great time for Baidu, China’s largest search engine. The company has had some difficult years since mid-2018 and has lagged behind rivals like Alibaba and Tencent. Baidu has failed to move quickly because Chinese users have migrated to mobile search and a difficult advertising market has hurt business.
But a twist, led by CEO Robin Li, focused on convincing investors that the technology giant is a leader in artificial intelligence and autonomous driving in an attempt to diversify its revenue stream beyond advertising. And it seems to be worth it.
In mid-May 2018, Baidu shares listed in the U.S. closed at $ 284.07 each, a record at the time. But the shares subsequently fell more than 70%, to a low of $ 83.62 in March 2020, amid the stock market crash. This was the lowest close since April 2013.
But since the March 2020 low, stocks have risen more than 200%. Baidu’s shares hit a record high of $ 354.82 in February.
“I think EV (electric vehicles) is part of the story. At the same time, cloud computing, AI integration, are all areas in which Baidu has been investing heavily since 2014 and we are just beginning to see the fruits of this work”, Brendan Ahern, chief investment officer at KraneShares, told Squawk Box Asia on Tuesday.
Baidu has an autonomous steering system called Apollo, which can be sold to automakers. The company started an independent electric vehicle company in partnership with Chinese automaker Geely. Baidu is also testing robotáxis in cities, including Beijing. And last month, the company launched a smart transportation project in the southern Chinese city of Guangzhou, the largest so far.
James Lee, US and China Internet analyst at Mizuho Securities, has a $ 350 price target for U.S. listed Baidu shares, which is 31% higher than Monday’s closing price on Wall Street. He said the autonomous driving business could be valued at $ 40 billion and that the Chinese government will continue to support this industry with favorable policies. Lee also said that he expects Baidu’s advertising business to continue to gain momentum in the first quarter of this year.
“We like the fundamentals of the company and continue to hope that Baidu’s stock will outperform the market,” Lee told Street Signs Asia on Tuesday.
Meanwhile, Baidu seeks to further diversify its revenue streams. The company raised money for its $ 2 billion Kunlun artificial intelligence semiconductor unit.