Robin Li Yanhong, co-founder and CEO of Baidu in Beijing, China, in October 2018.
Visual China Group | Getty Images
GUANGZHOU, China – Baidu shares rose just under 1% when the company opened in Hong Kong on Tuesday.
The Chinese technology giant, already listed in the United States, raised $ 3.1 billion on the Hong Kong secondary list. Shares reduced those gains during the morning trade.
Unlike initial public offerings, secondary listings may not be received with massive concentrations on the first day, as the company’s shares are already listed on another stock exchange.
The Hong Kong listing is a big time for Baidu, China’s largest search engine. The company has been around for a couple of years since mid-2018 and has lagged behind rivals like Alibaba and Tencent. Baidu was unable to move forward quickly, as Chinese users turned to mobile search and a tough advertising market hurt the business.
But a twist, led by CEO Robin Li, has focused on convincing investors that the tech giant is a leader in artificial intelligence and autonomous driving in an attempt to diversify its revenue beyond advertising. And that seems worth it.
In mid-May 2018, Baidu’s U.S. listed shares closed at $ 284.07 per share, a record at the time. But subsequently, shares fell above 70%, to a low of $ 83.62 in March 2020, amid the stock market crash. This was the lowest closing since April 2013.
But since the March 2020 low, shares have risen more than 200%. Baidu shares hit an all-time high of $ 354.82 in February.
“I believe that electric vehicles (EVs) are part of history. At the same time, cloud computing, the integration of artificial intelligence, are all areas in which Baidu has been investing very heavily since 2014 and we are just beginning to see the fruits of that work, ”KraneShares Investment Director Browan Ahern told Squawk Box Asia on Tuesday.
Baidu has a standalone driving system called Apollo that can be sold to car manufacturers. The company started an independent electric vehicle company in partnership with Chinese manufacturer Geely. Baidu is also testing robotaxis in cities, including Beijing. And last month, the firm launched a smart transportation project in the southern Chinese city of Guangzhou, the largest yet.
James Lee, a U.S. and Chinese Internet analyst at Mizuho Securities, has a target price of $ 350 on shares listed on Baidu in the U.S., 31% higher than Monday’s closing price on Wall Street. He said the self-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 he expects Baidu’s advertising business to continue to gain momentum in the first quarter of this year.
“We like the company’s fundamentals and continue to expect Baidu’s shares to outperform the market,” Lee told “Street Signs Asia” on Tuesday.
Meanwhile, Baidu has been looking to further diversify its revenue streams. The company has raised money for its $ 2 billion Kunlun artificial intelligence semiconductor unit.